A day after President Trump sparked a massive stock rally by declaring a 90-day pause on most of the “reciprocal” tariffs he has imposed on trading partners around the world, the White House clarified its approach to China, which had been excluded from the delay. Rather than the 125% tariff on Chinese goods that Trump announced yesterday, the White House explained that the tariff is actually 145% — the newly announced 125% on top of a previously imposed 20%.
The news helped send stocks sharply lower on Thursday, accelerating losses that reclaimed a good chunk of the gains recorded the day before. The S&P 500 fell 3.5%, while the Dow Jones Industrial Average shed more than 1,000 points, or 2.5%. Stocks are still below where they were eight days ago, when Trump proclaimed “liberation day” in the form of higher tariffs.
Even before the clarification from the White House, stocks were moving lower, as investors took in the sheer size of Trump’s new tariffs and the risks inherent in an ongoing tariff war with one of the country’s largest trading partners.
“Investors have sobered up,” Melissa Brown, managing director of applied research at SimCorp, told CNBC. “Uncertainty is a big issue because the 145% rate could be a different number tomorrow. It’s very hard to call a bottom or a top because things have changed so much in the narrative and investor perceptions.”
Former Federal Reserve Chair Janet Yellen criticized Trump’s tariff initiative Thursday, telling CNN that they increased the odds of recession as consumers and businesses cut back on spending. “This is the worst self-inflicted wound that I have ever seen an administration impose on a well-functioning economy,” Yellen said. “We had a very well-functioning economy, and President Trump has taken a wrecking ball to it.”
At a Cabinet meeting Thursday, Trump gave tariff critics a glimmer of hope when he didn’t rule out the possibility of another pause on the import taxes, even as he spoke about reinstating them for any country that fails to make a trade deal with the U.S. “We’ll have to see what happens,” Trump said.