By Abha Bhattarai · The Washington Post (c) 2025
President Donald Trump’s intensifying trade war sent stock markets reeling as investors, companies and Americans fretted about rising costs from an onslaught of new tariffs.
U.S. stocks fell sharply Thursday, with the S&P 500 dropping more than 4 percent and the Nasdaq down 5 percent. The Dow Jones Industrial Average, meanwhile, slid 1,400 points. Major indexes in Asia and Europe also took a fall, although some recovered their losses during their trading day.
The rollout of new tariffs, which are expected to cost U.S. consumers and businesses billions of dollars this year, threatens to radically alter the economic outlook. Economists on Wall Street and beyond are now warning that a downturn is becoming much more likely this year.
“The level of new tariffs is just absolutely massive,” said Luke Tilley, chief economist at Wilmington Trust, which now puts the odds of a recession at 50 percent, up from 40 percent earlier this week. “There is still so much uncertainty, but if these tariffs stay on for three months, there’ll be a recession – and that will be one of the easier calls I’ve had to make in my 25 years of being an economist.”
On Wednesday, Trump introduced a 10 percent tariff on all imports, which will take effect Saturday, and additional taxes that will bring the levies up to 50 percent on goods from certain countries beginning April 9. A separate 25 percent tariff on imported vehicles went into effect Thursday, starting at midnight.
White House officials have said the latest tariffs are just the beginning of ongoing negotiations, and they could quickly move higher if other countries begin ratcheting up taxes on American products.
“My advice to every country right now is, do not retaliate,” Treasury Secretary Scott Bessent told Fox News on Wednesday evening. “Sit back, take it in, let’s see how it goes. Because if you retaliate, there will be escalation. If you don’t retaliate, this is the high watermark.”
However, several world leaders promised to respond, including those in China and the European Union. Most governments held back on specific countermeasures, vowing to react with “cool and calm heads,” in the words of British Prime Minister Keir Starmer. But beneath the diplomatic restraint were anger and fears of spreading economic chaos.
“This decision, which is so unprincipled, so abrupt, so profound in its impact, calls into question what kind of partner the U.S. will be,” said Susannah Patton, director of the Southeast Asia Program at the Lowy Institute, an Australian think tank. “It will play into China’s narrative that the U.S. is an unreliable, distant partner that can come and go.”
The size of the tariffs stunned U.S. allies in particular.
“The administration’s tariffs have no basis in logic, and they go against the basis of our two nations’ partnership,” said Australian Prime Minister Anthony Albanese, whose country got off relatively lightly with a 10 percent blanket duty. “This is not the act of a friend.”
The European Union, which was hit with a 20 percent blanket tariff, is ready to respond if talks with Washington fail, said the head of the E.U. executive branch, European Commission President Ursula von der Leyen.
“There seems to be no order in the disorder. No clear path through the complexity and chaos,” she said in a statement describing the tariffs as a “major blow.”
The 27-nation bloc is finalizing its first round of retaliation to U.S. steel tariffs and is “now preparing for further countermeasures to protect our interests and our businesses if negotiations fail,” she said.
The tariffs are particularly onerous on China, the world’s second-biggest economy and the target of much of Trump’s ire as it ran a nearly $1 trillion trade surplus with the United States last year.
The new tariff of 34 percent on Chinese goods comes on top of the 20 percent levy already imposed as Trump accused Beijing of not doing enough to stop the flow of fentanyl and its precursors into the United States. It is also in addition to the existing tariffs on goods, including some appliances, machinery and clothing, that were already as high as 45 percent.
Uncertainty is creating chaos for business owners, including many that have spent years expanding manufacturing operations in countries such as Mexico, Vietnam and India, as part of an effort to work around the tariffs Trump placed on Chinese goods during his first term. Now imports from those three countries – along with dozens others – will soon cost much more.
On Wednesday evening, small-business owner Anjali Bhargava was trying to tally up the higher costs she will face on ingredients for the turmeric and chai blends she sells at retailers such as Whole Foods. The fallout would be swift and vast, she said: a 26 percent price hike on tea from India, an extra 36 percent for turmeric from Thailand and an additional 46 percent on cinnamon and ginger from Vietnam.
“I’m honestly stunned,” said Bhargava, 48, who founded her business, Anjali’s Cup, in 2014. “I may have to just use the ingredients I’ve been able to buy and throw in the towel. But then what? [I’ve] taken on so much debt to keep things going through the pandemic and to grow.”
(Whole Foods is owned by Amazon, whose founder Jeff Bezos owns The Washington Post.)
But some industries applauded the administration’s announcement Wednesday.
The American Petroleum Institute thanked Trump for excluding oil and natural gas from the new tariffs. The American Iron and Steel Institute, which represents North American steel producers, said Trump was “standing up for American workers.”
But industry groups representing restaurants and the food industry said tariffs would lead to higher prices and more stress on businesses. And some Democrats accused Trump of using tariffs as a political weapon that would devastate the economy.
Major labor unions said tariffs can be effective but suggested the administration still isn’t doing enough for workers. The president of United Steelworkers International said import taxes must be coupled with policies to increase domestic production and jobs, and the AFL-CIO president criticized the administration for separately attacking trade union workers’ rights.
The Trump administration has maintained that a period of economic turmoil is necessary to bring back manufacturing to the United States. Lopsided trade policies, the president said in an executive order, have cost the country millions of jobs and made the U.S. economy too reliant on foreign goods.
“If we’re going to make the United States a mecca of high-tech manufacturing, we have to work hand-in-hand with tariffs,” said Joseph LaVorgna, chief U.S. economist at SMBC Nikko Securities and former Trump White House economic adviser. “You need the tariff to get companies to at least consider moving to the U.S. – with no tariff, there’s no incentive for them to move.”
Just how disruptive the sweeping duties are for allies will depend on enforcement and potential exemptions, analysts said. The White House listed carve-outs for industries like semiconductors – crucial for artificial intelligence development and high-performance computing – and pharmaceuticals that may provide relief for partners such as Taiwan and South Korea.
Despite the exemption, semiconductor stocks saw notable losses early, including declines of more than 5 percent for AI and 3D-graphics chipmaker Nvidia and more than 7 percent for Taiwan Semiconductor Manufacturing Co., the world’s largest contract manufacturer of chips.
Companies that manufacture many of their products overseas were also hard hit, such as Nike, which has factories in Vietnam and other parts of Asia. Shares of the shoemaker were down more than 10 percent. The White House said Wednesday that goods from Vietnam will now be subject to a 46 percent tariff.
Stock in discount variety chain Dollar Tree, which imports many of its items from abroad, also fell more than 10 percent. Retail giant Target was down 9 percent.
The stock market had recovered slightly by early afternoon Thursday but remained sharply lower after its most volatile trading in years. Technology companies with interests abroad sold off; AI chipmaker Nvidia lost more than 6 percent while Apple fell nearly 9 percent. Nike fell 12 percent and Gap lost nearly 20 percent amid worsening fears of a consumer slowdown.
The Russell 2000 index, which includes small companies, fell more than 5 percent Thursday to enter bear market territory, meaning it dropped more than 20 percent below its recent high. Commodities sold off across the board including oil, industrial metals, and some agricultural products losing value.
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Shannon Najmabadi and Aaron Gregg contributed to this report. Christian Shepherd contributed reporting from Singapore and Steve Hendrix from London. Chie Tanakant in Tokyo, Lyric Li in Seoul, Rebecca Tan in Singapore, Kate Brady in Berlin and Ellen Francis and Beatriz Ríos in Brussels contributed to this report.