Trade war sets off 'max pessimism'

The S&P 500 falls almost 5% on Thursday, its worst drop since June 2020

- JOE RENNISON DANIELLE KAYE RIVER AKIRA DAVIS

Shockwaves reverberated through Wall Street on Thursday after a new, sweeping round of tariffs upended economic forecasts and intensified worries about global growth, sending stock markets tumbling.

The S&P 500 fell almost 5% on Thursday, its worst showing since June 2020 at the height of the coronavirus pandemic.

Thursday’s decline came after the S&P 500 had already fallen for five of the last six weeks, amid intensifying economic concerns pressured by tariff talk.

The tremors spread further than just stocks. Measures of inflation expectations jumped, intensifying fears of an economic slowdown and sending the dollar down against every currency of the group of 10 nations. Investors rushed to the safety of government debt.

The turmoil erupted after President Trump announced on Wednesday a new 10% baseline tariff on all imports as well as additional, country-specific taxes on goods from a host of other countries. Those included increasing total tariffs on Chinese imports to 54%.

In a period in the markets that has already been wracked with uncertainty, Trump’s higher-than-expected tariffs presented a new challenge to investors’ and economists’ outlooks.

While some economists are now forecasting that the inflation from tariffs will keep interest rates elevated, investors are betting that the shock to the economy will force the Federal Reserve to cut rates more rapidly.

“Trump’s tariff plan probably represents a shift for markets to quickly move from max uncertainty to max pessimism,” said Jeff Buchbinder, the chief equity strategist for LPL Financial.

‘THROWING DARTS’

Other analysts and investors simply expressed bewilderment.