Donald Trump’s tariffs jar the U.S. stock market, worry consumers

NEW YORK — Financial markets around the world are reeling Thursday morning following President Donald Trump’s latest and most severe volley of tariffs, and the U.S. stock market may be taking the worst of it.

The S&P 500 was down 3.3% in early trading, worse than the drops for other major stock markets. The Dow Jones Industrial Average was down 1,204 points, or 2.9%, as of 9:50 a.m., and the Nasdaq composite was 4.3% lower.

Little was spared as fear flared globally about the potentially toxic mix of higher inflation and weakening economic growth that tariffs can create. Prices fell for everything from crude oil to Big Tech stocks to small companies that invest only in U.S. real estate. Even gold, which has hit records recently as investors sought something safer to own, pulled lower.

The value of the U.S. dollar also slid against other currencies, including the euro and Canadian dollar.

Some surprises

Investors worldwide knew Trump was going to announce a sweeping set of tariffs late Wednesday, and fears surrounding it had already pulled the S&P 500 10% below its all-time high last month.

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 frightening that it “makes one’s rational mind regard the possibility of them sticking as low,” according to Bhanu Baweja and other strategists at UBS.

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 — wresting manufacturing jobs back to the United States, for example — than just an opening bet in a poker game.

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 global recession that could follow, along with the hit to profits that U.S. companies could take because of them.

How could you be affected?

In a conservative slice of Orange County, California, for example, concerns about higher prices and the uncertainty surrounding the country’s economic future was palpable as the Trump administration rolled out its global plan for tariffs in what the president called “Liberation Day.”

At the Costco in Huntington Beach on Wednesday, Danielle Calfo said she and her husband were trying to plan ahead as much as possible — with two boys and a third son due any day now.

The 33-year-old stay-at-home mother said she and her husband had made all the necessary repairs to their cars early in the year, concerned that prices on parts shipped from overseas would soon skyrocket.

Trump’s tariff push aims to get automakers to manufacture more vehicles on U.S. soil to overcome rising import costs. During his first term, the threat of auto tariffs, alongside existing plans, helped spur Toyota’s $1.6 billion investment in a North Carolina plant and Volkswagen’s expansion of its operations in Tennessee.

But here’s the catch: “Made in the USA” doesn’t always mean “made for less.” American auto plants often face productivity and efficiency gaps compared with foreign competitors. Labor costs are higher. Assembly lines move more slowly, partly due to stricter labor protections, less automation and aging infrastructure.

And U.S. automakers such as Ford and GM still depend heavily on global supply chains. Even for vehicles assembled in America, about 40% of the parts, such as engines from Canada and wiring harnesses from Mexico, are imported. When those parts are taxed, production costs go up.

Coffee in the U.S. risks getting even more expensive as Trump’s sweeping tariff measures hit Vietnam, one of its biggest suppliers, with hefty levies.

“The tariffs will likely add to coffee market volatility and could exacerbate existing supply tightness,” said Priyanka Sachdeva, senior market analyst at brokerage Phillip Nova Pte. in Singapore. “U.S. coffee prices could rise, especially for robusta-based products.”

‘Stagflation’ concerns

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 4.02% 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 inflation because of tariffs, with U.S. households in particular bracing for sharp increases. The Fed has no good tool to fix what’s called “stagflation,” where the economy stagnates and inflation stays high.

The economy at the moment is still growing, of course. A report on Thursday said fewer U.S. workers applied for unemployment benefits last week, the latest signal that the job market remains OK overall. Economist had been expecting to see an uptick in joblessness.

But worries about possible stagflation nevertheless knocked down stocks across industries, leading to drops for three out of every four stocks that make up the S&P 500.

Nike fell 12% because so many of its products are made outside the United States. United Airlines lost 10.6% because customers worried about the global economy may not fly as much for business or feel comfortable enough to take vacations. Discount retailer Dollar Tree tumbled 8.5% amid worries that its customers, already squeezed by still-high inflation, may be under even more stress.

In stock markets abroad, indexes fell sharply worldwide. France’s CAC 40 dropped 2.9%, and Germany’s DAX lost 2.1% in Europe.

Japan’s Nikkei 225 dropped 2.8%, Hong Kong’s Hang Seng lost 1.5% and South Korea’s Kospi dropped 0.8%.

America’s trading partners aren’t standing still. Canadian Prime Minister Mark Carney says his country “will fight back – with purpose and with force.” The European Union is exploring duties on American tech firms. Japan, a longtime ally, is signaling unease. If these countries redirect investment to other countries, the U.S. could lose its competitive edge for years to come.

The list

These are the nations, many of them U.S. allies, that Trump has claimed take advantage of the U.S. through unfair trade practices.

Russia is not on the list, possibly because of existing sanctions. Press Secretary Karoline Leavitt said Cuba, Belarus and North Korea also aren’t included because tariffs and sanctions on them are already high.

These tariffs, which are paid by U.S. importers, not by the exporting jurisdiction, are set to go into effect on April 9.

Any nation not listed below, according to the president, will face a 10% baseline tariff starting Friday.

• Algeria 30%
• Angola 32%
• Bangladesh 37%
• Bosnia and Herzegovina 36%
• Botswana 38%
• Brunei 24%
• Cambodia 49%
• Cameroon 12%
• Chad 13%
• China 34%
• Côte d`Ivoire 21%
• Democratic Republic of the Congo 11%
• Equatorial Guinea 13%
• European Union 20%
• Falkland Islands 42%
• Fiji 32%
• Guyana 38%
• India 27%
• Indonesia 32%
• Iraq 39%
• Israel 17%
• Japan 24%
• Jordan 20%
• Kazakhstan 27%
• Laos 48%
• Lesotho 50%
• Libya 31%
• Liechtenstein 37%
• Madagascar 47%
• Malawi 18%
• Malaysia 24%
• Mauritius 40%
• Moldova 31%
• Mozambique 16%
• Myanmar (Burma) 45%
• Namibia 21%
• Nauru 30%
• Nicaragua 19%
• Nigeria 14%
• North Macedonia 33%
• Norway 16%
• Pakistan 30%
• Philippines 18%
• Serbia 38%
• South Africa 31%
• South Korea 26%
• Sri Lanka 44%
• Switzerland 32%
• Syria 41%
• Taiwan 32%
• Thailand 37%
• Tunisia 28%
• Vanuatu 23%
• Venezuela 15%
• Vietnam 46%
• Zambia 17%
• Zimbabwe 18%

Information for this story came from Stan Choe, AP business writer; Matthew Medsger, the Boston Herald; Bedassa Tadesse, University of Minnesota Duluth, via The Conversation.