Markets Plummet as Trump Defies Trade War Concerns, Vows Economic Gains

The U.S. stock market lost approximately $1.65 trillion in value as tech giants and broader indices plunged amid renewed trade war fears triggered by President Donald Trump's threats of increased tariffs on China. The S&P 500 fell 4.8%, the Nasdaq Composite dropped 6%, and the Dow Jones Industrial Average tumbled 4% in a single session, marking the worst performance since the pandemic-induced crash in 2020 AP News^[3]. The sell-off was driven by Trump's announcement of "massive" tariff hikes on Chinese imports and retaliatory measures from China, which imposed export controls on rare earth minerals critical to semiconductor production CNN^[1].

The tech sector bore the brunt of the decline, with the Nasdaq's 6% drop reflecting heightened sensitivity to U.S.-China trade tensions. Major AI and chip stocks, including Nvidia and Advanced Micro Devices, fell 2-6%, while broader market volatility surged, sending the CBOE Volatility Index up 26% CNN^[1]. Analysts attributed the sharp sell-off to concerns that tariffs could trigger a global economic slowdown, reduce corporate earnings, and exacerbate inflationary pressures. José Torres of Interactive Brokers noted that tech stocks, already trading at elevated valuations, were particularly vulnerable to shocks tied to trade policy CNN^[1].

The sell-off extended beyond equities, with crude oil prices sliding 4% and Brent crude dropping 3.6% as investors anticipated reduced demand in a potential trade war CNN^[1]. Safe-haven assets like gold and silver gained 0.8-1.2%, while U.S. Treasurys rallied as expectations of Federal Reserve rate cuts rose AP News^[3]. Smaller-cap stocks fared worse, with the Russell 2000 index of smaller companies falling 6.6%, pushing it 20% below its record high AP News^[3].

Trump's rhetoric escalated tensions after China restricted rare earth exports, a move the president called an attempt to "hold the world captive." He canceled plans to meet Chinese President Xi Jinping at the APEC summit and warned of reciprocal tariffs on U.S. goods ABC News^[2]. Retaliatory measures from Canada and China further deepened market jitters, with Canada threatening $155 billion in tariffs on U.S. imports and China imposing 10-15% levies on U.S. agricultural products BBC News^[4].

Corporate leaders and analysts expressed caution. Best Buy's shares fell 17.8% after the retailer warned of price hikes due to tariffs, while United Airlines and Target dropped 15.6% and 10.9%, respectively, as consumer demand concerns mounted AP News^[3]. UBS strategists estimated that tariffs could reduce U.S. economic growth by 2 percentage points and push inflation near 5% this year, though they noted the likelihood of such measures being sustained was low AP News^[3].

The Federal Reserve faces a delicate balancing act, as rate cuts could mitigate economic fallout but risk fueling inflation. Treasury yields on 10-year bonds fell to 4.04% from 4.20%, reflecting investor bets on accommodative monetary policy AP News^[3]. Meanwhile, Trump dismissed market volatility, claiming the tariffs would ultimately strengthen the economy and asserting the sell-off was a necessary "operation" for long-term gains AP News^[3].