U.S. stocks plummeted in their worst session since 2020 on Thursday amid retaliation warnings from around the world the day after President Donald Trump unveiled his wide-ranging tariff program aimed at boosting U.S. manufacturing by pressuring companies to make their products in America.
Trump declared sweeping tariffs of 10% on imports from all countries and much higher levies on about 60, including the European Union and other trade partners, fueling tensions in a global trade war and shaking already wobbly financial markets. The announcement fulfilled the president’s vow to punish countries he says have treated the U.S. unfairly with their own tariffs and trade barriers.
Trump, typically acutely aware of how the stock market performs, tried to project optimism when talking to reporters, comparing the economy to a patient who needed surgery and adding:
“The markets are gonna boom. The stock is gonna boom, the country’s gonna boom, and the rest of the world wants to see is there any way they can make a deal.”
Ursula von der Leyen, president of the European Commission, was less optimistic, calling Trump‘s levies “a major blow” that will fuel inflation around the world. She said the EU would respond with countermeasures but provided no details.
“I know that many of us feel let down by our oldest ally,” von der Leyen said Thursday. “It is not too late to address concerns through negotiations. Let’s move from confrontation to negotiation.”
The timing of the tariffs was curious to many economists, who feared the plan could trigger inflation and spin the economy toward recession.
“The U.S. has long used tariffs to collect revenue, aid manufacturing and exert power,” said Andrew Cohen, author and history professor at the Maxwell School at Syracuse University. “But I can’t think of a trade war initiated so randomly in a time of peace and prosperity.”
Developments:
∎ The Trump administration said it will delay by a day the spring garden tours initially scheduled for Saturday, when the new tariffs will go into effect, “to ensure the safety of all within proximity to public demonstrations planned near the White House.”
∎ India’s trade ministry said Thursday that it was “carefully examining the implications” of the 27% U.S. tariff. U.S.-India trade talks are ongoing, the ministry said.
∎ Mexican President Claudia Sheinbaum said Thursday that trade officials are talking with U.S. representatives and cooperation between the countries is strong.
∎ In a rare rebuke by the GOP-controlled Senate, four Republicans crossed party lines to pass a resolution 51-48 Wednesday evening to end Trump’s emergency declaration enabling tariffs against Canada. The resolution has virtually no chance to be approved in the Republican-led House or of being signed into policy by Trump.
U.S. stocks were sharply lower at the end of Thursday’s session, global stocks also slumped and gold flirted with record highs in response to the global tariff avalanche. The blue-chip Dow plunged nearly 4%, the broad S&P 500 was down almost 6%, and the tech-heavy Nasdaq dropped close to 5%. All had entered the day well off historic highs.
Bank stocks took a beating and some retailers with production hubs in Vietnam, Indonesia and China also took a big hit. Nike was down more than 9% and Ralph Lauren more than 16%.
Investors fear the tariffs will spark an all-out trade war. Canada, China and the European Union were among several trade partners asserting they will retaliate with reciprocal tariffs. Many economists have warned that could push prices higher and slow the economy.
“The tariff announcement was much more dire than expected,” said Sam Stovall, chief investment strategist at CFRA Research. “As a result, stocks are in a free fall.” Read more here.
− Medora Lee
Trump has painted tariffs as a tool to raise revenue and offset costs associated with proposed tax cuts, saying, “You’re going to see billions of dollars, even trillions of dollars, coming into our country very soon in the form of tariffs.”
Some more money may indeed flow into the Treasury Department, but likely at the expense of American consumers, because the importers who pay the tariffs on foreign goods typically pass along at least part of the extra cost to customers.
The Trump tariffs are expected to raise consumer prices by 2.3% on average in the short run, costing the typical U.S. household about $3,800 in annual disposable income, according to a Wednesday analysis from the Yale Budget Lab. The impact tends to be harder on low-income households that can ill afford the loss.
− Bailey Schulz
After Trump’s tariff announcement Wednesday, the White House released an executive order that said pharmaceuticals would be exempt from reciprocal tariffs, along with copper, semiconductors, lumber, certain critical minerals and energy sources and products.
Drugmakers may have dodged a bullet considering Trump has suggested several times there could be trade actions for an industry that has globalized since the 1990s with a drug supply chain that stretches from Europe to India.
It’s not clear how long that exemption will last. In February, Trump said tariffs on imported drugs would likely start around 25% and could climb higher. Analysts have said that would significantly increase prescription drug prices, especially for generic drugs and medications with ingredients mostly made abroad.
− Ken Alltucker
Trump accused the EU of imposing a 39% tariff on U.S. products. Dismayed EU officials said the actual tariff is less than 5%, and the World Trade Organization has put the rate at about 5%. So where does the administration get its tariffs numbers?
Financial writer James Surowiecki, in a post on X, says it appears the administration took the U.S. trade deficit with each nation and divided it by the total value of goods imported into the U.S. from that nation. Euronews and The New York Times ran the numbers and the rate for the EU came up close to 39%. The U.S. tariff rates in many cases, such as the EU, were then set at about half that rate, with a minimum of 10%.
Surowiecki also said the formula appears to ignore services, where the U.S. generally runs a trade surplus.
White House Deputy press secretary Kush Desai posted a lengthy formula on social media and dismissed Surowiecki’s claim: “No, we literally calculated tariff and non tariff barriers.”
Surowiecki was unimpressed: “When you back out the Greek symbols, what is that formula? Trade deficit/imports − exactly what I said it was.”
Apparently the Trump administration has actually heard about Lesotho, at least enough to slap the small nation in southern Africa with the harshest reciprocal tariffs of any country, a whopping 50%.
Just last month, Trump said “nobody has ever heard of” the mountainous kingdom of 2 million people, which is engulfed by the much larger South Africa.
Lesotho, with a gross domestic product of a little over $2 billion, exported more than 10% of that figure to the U.S. in 2024, totaling $237 million. Most of those goods were diamonds and textiles, including Levi’s jeans. That modest amount still made for a large trade deficit because the U.S. only imported $2.8 million in 2024 from Lesotho, which has a 99% tariff on goods coming from America, according to the Trump administration.
Lesotho, with an annual per capita GDP of $3,000, has one of the world’s highest HIV/AIDS infection rates and is already contending with the loss of health care assistance from Trump’s cuts to the U.S. Agency for International Development.
The day after Trump implemented sweeping tariffs, two senators introduced a bill that would require the president to get congressional approval for universal tariffs.
The bill from Sen. Chuck Grassley, R-Iowa, and Sen. Maria Cantwell, D-Wash., would require the president to notify Congress within 48 hours if the administration imposed a tariff, and to provide both reasoning for the tariff and analysis on the impact to businesses and consumers. Within 60 days, Congress would need to pass a resolution approving the tariffs or they would automatically end.
“For too long, Congress has delegated its clear authority to regulate interstate and foreign commerce to the executive branch,” Grassley said in a statement. This bill would ”reassert Congress’ constitutional role and ensure Congress has a voice in trade policy.”
Trump’s tariffs are so broadly appointed that uninhabited islands were hit with the levies. The Heard Island and McDonald Islands, with a population mostly consisting of penguins, were apparently included at 10% because they are Australian territories. They had no trade at all with the U.S. last year. But a tongue-in-cheek Heard Island government social media outlet is monitoring the situation.
“Our foreign secretary has confirmed that America did indeed forget to hit the OFF button after April Fool’s day,” one post says. “Unfortunately, it may be permanently stuck on now much like daylight savings time and QR code menus. We must keep our Flippers Up and fight on.”
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Some car dealerships are seeing an increase in business as car buyers try to get ahead of the 25% tariff on vehicles and parts produced outside the United States. Trump’s tariffs on vehicles kicked in this week and are expected to significantly increase the prices of new vehicles.
Higher prices for new cars are also expected to raise used-car prices, though it’s unclear when consumers can expect price hikes with lots still lined with cars and trucks that were not subject to the tariffs. Data from car-shopping app CoPilot found supply on dealership lots has dropped “significantly” since March 23, especially among foreign-manufactured vehicles.
“I think you’re starting to see a little more panic and concern about the tariff,” said Art Wheaton, director of labor studies at Cornell University’s School of Industrial and Labor Relations and a transportation industries specialist.
− Bailey Schulz, Jessica Guynn
Tariffs are primarily levied on imports, typically to protect industries in the country levying them. Tariffs make imports more expensive, thus making local goods cheaper by comparison. Tariffs also can provide income that can be used to support local industries, fund public programs or cover government expenditures.
And they can serve as bargaining tools to win concessions from trading partners.
“While tariffs may seem to penalize foreign producers by making their goods or services less competitive, the reality is that U.S. consumers and businesses ultimately bear the cost,” the Wilson Center scholars Diego Marroquín Bitar and Valeria Moy write in a “Tariffs 101” analysis.
E.J. Antoni, a public finance economist and senior fellow at the conservative Committee to Unleash Prosperity, disagrees, saying in his opinion piece for Fox News earlier this month that economic history tariffs are always at least partly paid for by exporters, not just customers.”
Contributing:Reuters
Contributing:Swapna Venugopal Ramaswamy
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