WASHINGTON: Wall Street experienced sharp declines amid President Trump’s tariff announcement. The new policy stirred fears of a looming recession.
Massive Losses
Dow futures dropped by 1,200 points, or 2.87%, signaling a rough day ahead. The S&P 500 index was poised to open 3.5% lower. This indicated the potential for its worst day since the 2022 inflation crisis.
The tech-heavy Nasdaq was expected to plummet 4.2%. Global markets also faced significant losses on Thursday. The steep declines were triggered by concerns over the potential consequences of the tariffs.
Trade Concerns
Trump’s massive tariff imposition on nearly all imports to the US sparked worries about its economic impact. Investors feared that the move could provoke strong retaliation from trade partners. This, in turn, could cause a significant economic downturn globally.
There was widespread concern that the tariffs would negatively affect the US and global economies. With international relations strained, the risk of a global recession appeared more likely.
Dollar Falls
The US dollar also suffered a blow, falling to its weakest point since October. Normally, tariffs are expected to strengthen the dollar. However, fears that the US is self-sabotaging its future growth caused investors to flee to safer assets.
In the face of such concerns, the dollar weakened against other global currencies. This added to the sense of economic instability. Market analysts warned that the tariff-driven uncertainty could cause lasting damage to the economy.
Safe-Haven Assets
As investors sought safer investments, gold prices surged to record highs. Gold hit a new high of $3,160 per troy ounce on Wednesday. This marked a significant milestone, with gold up 19% this year alone.
The surge in gold prices reflected growing concerns about economic instability and the potential recession. The asset has seen its best quarter since 1986, a clear sign of investor caution.
Treasury Bonds
Meanwhile, Treasury bond yields fell sharply. The yield on the 10-year Treasury note dropped to its lowest level since October. This further emphasized the market’s unease and investors’ preference for safer assets.
Bonds and prices typically move in opposite directions, and the falling yields reflected concerns about the broader economy. The bond market, like gold, saw increased demand due to fears of a downturn.
Recession Fears
The sharp market declines and weakening dollar were a direct response to the uncertainty surrounding the tariffs. The imposition of the tariffs has ignited fears that the US may be headed into a recession.
With no immediate resolution in sight, many analysts are predicting a slowdown. Global economies could also face consequences as trade tensions escalate.
The broader impact of the tariffs could have lasting effects on both the US and global economic outlook. The looming trade war could add to the strain already felt from the 2022 inflation crisis.
