Dow drops 1,600 as US stocks lead worldwide sell-off after Trump’s
tariffs cause a COVID-like shock
[April 04, 2025] By
STAN CHOE
NEW YORK (AP) — Wall Street shuddered, and a level of shock unseen since
COVID’s outbreak tore through financial markets worldwide Thursday on
worries about the damage President Donald Trump’s newest set of tariffs
could do to economies across continents, including his own.
The S&P 500 sank 4.8%, more than in major markets across Asia and
Europe, for its worst day since the pandemic crashed the economy in
2020. The Dow Jones Industrial Average dropped 1,679 points, or 4%, and
the Nasdaq composite tumbled 6%.
Little was spared in financial markets as fear flared about the
potentially toxic mix of weakening economic growth and higher inflation
that tariffs can create.
Everything from crude oil to Big Tech stocks to the value of the U.S.
dollar against other currencies fell. Even gold, which hit records
recently as investors sought something safer to own, pulled lower. Some
of the worst hits walloped smaller U.S. companies, and the Russell 2000
index of smaller stocks dropped 6.6% to pull more than 20% below its
record.
Investors worldwide knew Trump was going to announce a sweeping set of
tariffs late Wednesday, and fears surrounding it had already pulled Wall
Street’s main measure of health, the S&P 500 index, 10% below its
all-time high. But Trump still managed to surprise them with “the worst
case scenario for tariffs,” according to Mary Ann Bartels, chief
investment officer at Sanctuary Wealth.
Trump announced a minimum tariff of 10% on imports, with the tax rate
running much higher on products from certain countries like China and
those from the European Union. It’s “plausible” the tariffs altogether,
which would rival levels unseen in roughly a century, could knock down
U.S. economic growth by 2 percentage points this year and raise
inflation close to 5%, according to UBS.
Such a hit would be so big that it “makes one’s rational mind regard the
possibility of them sticking as low,” according to Bhanu Baweja and
other strategists at UBS.
Trump has previously said tariffs could cause “a little disturbance” in
the economy and markets, and on Thursday he again downplayed the impact
as he left the White House to fly to Florida.
“The markets are going to boom, the stock is going to boom and the
country is going to boom,” Trump said.
Wall Street had long assumed Trump would use tariffs merely as a tool
for negotiations with other countries, rather than as a long-term
policy. But Wednesday’s announcement may suggest Trump sees tariffs more
as helping to solve an ideological goal than as an opening bet in a
poker game. Trump on Wednesday talked about wresting manufacturing jobs
back to the United States, a process that could take years.
If Trump follows through on his tariffs, stock prices may need to fall
much more than 10% from their all-time high in order to reflect the
recession that could follow, along with the hit to profits that U.S.
companies could take. The S&P 500 is now down 11.8% from its record set
in February.
“Markets may actually be underreacting, especially if these rates turn
out to be final, given the potential knock-on effects to global
consumption and trade,” said Sean Sun, portfolio manager at Thornburg
Investment Management, though he sees Trump’s announcement on Wednesday
as more of an opening move than an endpoint for policy.
Trump offered an upbeat reaction after he was asked about the market’s
drop as he left the White House to fly to his Florida golf club on
Thursday.
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A trader works on the floor at the New York Stock Exchange in New
York, Thursday, April 3, 2025. (AP Photo/Seth Wenig)
 “I think it’s going very well,” he
said. “We have an operation, like when a patient gets operated on
and it’s a big thing. I said this would exactly be the way it is.”
One wild card is that the Federal Reserve could cut interest rates
in order to support the economy. That’s what it had been doing late
last year before pausing in 2025. Lower interest rates help by
making it easier for U.S. companies and households to borrow and
spend.
Yields on Treasurys tumbled in part on rising expectations for
coming cuts to rates, along with general fear about the health of
the U.S. economy. The yield on the 10-year Treasury fell to 4.04%
from 4.20% late Wednesday and from roughly 4.80% in January. That’s
a huge move for the bond market.
The Fed may have less freedom to move than it would like, though.
While lower rates can goose the economy, they can also push upward
on inflation. And worries are already worsening about that because
of tariffs, with U.S. households in particular bracing for sharp
increases to their bills.
The U.S. economy at the moment is still growing, of course. A report
on Thursday said fewer U.S. workers applied for unemployment
benefits last week. Economist had been expecting to see an uptick in
joblessness, and a relatively solid job market has been the linchpin
keeping the economy out of recession.
A separate report said activity for U.S. transportation, finance and
other businesses in the services industry grew last month. But the
growth was weaker than expected, and businesses gave a mixed picture
of how they see conditions.
Worries about a potentially stagnating economy and high inflation
knocked down all kinds of stocks, leading to drops for four out of
every five that make up the S&P 500.
Best Buy fell 17.8% because the electronics that it sells are made
all over the world. United Airlines lost 15.6% because customers
worried about the global economy may not fly as much for business or
feel comfortable enough to take vacations. Target tumbled 10.9% amid
worries that its customers, already squeezed by still-high
inflation, may be under even more stress.
All told, the S&P 500 fell. 274.45 points to 5,396.52 The Dow Jones
Industrial Average sank 1,679.39 to 40,545.93, and the Nasdaq
composite tumbled 1,050.44 to 16,550.61.
In stock markets abroad, indexes fell sharply worldwide. France’s
CAC 40 dropped 3.3%, and Germany’s DAX lost 3% in Europe.
Japan’s Nikkei 225 sank 2.8%, Hong Kong’s Hang Seng lost 1.5% and
South Korea’s Kospi dropped 0.8%.
___
AP Writers Matt Ott, Elaine Kurtenbach and Darlene Superville
contributed.
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