Dow sheds 1,700 points. S&P 500 and Nasdaq have worst day since 2020 on tariff worries

U.S. stock losses closed sharply lower, with the blue-chip Dow losing nearly 1,700 points and the broad S&P 500 tumbling about 275 points, after President Donald Trump unveiled his tariff plan late Wednesday.

Trump announced sweeping tariffs of at least 10% on all countries, effective April 5, and even higher levies for some countries to start soon. Some of China's neighbors and biggest trading partners such as Bangladesh, Vietnam, Laos and Cambodia were slapped with the highest tariffs. Some multinational companies have moved their supply chains to these countries as they looked to diversify away from China.

Shares of companies like Walmart, Target, Five Below, Gap, Dollar Tree and Amazon that import a bulk of their goods from Asia dropped.

Among big tech, Apple shares got hammered, down 9.25%, because of its large manufacturing base in China.

Semiconductor and pharmaceuticals were among those exempted in this round, economists noted.

Investors fear the tariffs will spark an all-out trade war. Countries around the world from China to Canada lined up to denounce the tariffs and warn they will retaliate with reciprocal tariffs. A trade war would push prices higher and slow the economy, economists said.

“Although the U.S. seemed to open the door to negotiations with trading partners, domestic political considerations in those countries could make new trade agreements difficult to achieve," said Brian Gardner, Stifel chief washington policy strategist. "Trade wars are easy to start but hard to end."

Gregory Daco, EY chief economist, said "for the median household, this (tariffs) would represent an annual income loss of $690 while for families in the bottom quintile the loss would surpass $1,000."

The Dow plunged 3.98%, or 1,679.39 points, to 40,545.93 and posted its largest one-day loss since September 2022; the S&P 500 lost 4.84%, or 274.45 points to 5,396.52 and had its worst day since June 2020; and the tech-heavy Nasdaq dropped 5.97%, or 1,050.44 points, to 16,550.60 for its biggest single day loss since March 2020. The S&P 500 and Nasdaq are in correction, which is defined as at least 10% below their record high. The value erased from the stock market on Thursday was the most since March 2020, the start of the Covid-19 pandemic.

"The next week will be critical as the highest tariff rates go in on April 9," said Jeff Buchbinder, Chief Equity Strategist for LPL Financial. "Stocks should stabilize once negotiations start to bear fruit and take rates down, assuming it's clear to markets that no meaningful tariff rates will be increased further because of retaliation."

Oil prices, meanwhile, tumbled more than 5.5% for its worst day in almost three years on fears a global economic slowdown will reduce demand for the black gold. Futher pressure came from the Organization of the Petroleum Exporting Countries and its allies' announcement this morning to make a larger-than-expected oil output hike in May.

Uncertainty remains, boosting safer assets

The benchmark 10-year Treasury yield sank to 4.045%, the lowest level since October, and gold soared to another record high before falling back as investors fled to safer assets. Treasury yields move in the opposite direction of price.

A lot of uncertainty remains, including the duration and potential exemptions and exclusions from these tariffs. "This uncertainty is likely to lead to a wait-and-see approach from businesses and feed market volatility," Daco said.

Portfolio managers are calling for patience to see how the tariffs unfold and urge Americans to remain invested for the long-term. "Eye-watering tariffs on a country-by-country basis scream 'negotiation tactic,' which will keep markets on edge for the foreseeable future," said Adam Hetts, portfolio manager and global head of multi-asset at Janus Henderson Investors. "Fortunately, this means there's substantial room for lower tariffs from here, albeit with a 10% baseline in place."

Chris Zaccarelli, chief investment officer for Northlight Asset Management, said "the silver lining for investors could be that this is only a starting point for negotiations with other countries and ultimately tariff rates will come down across the board – but for now traders are shooting first and asking questions later."

The sell off, "while never comfortable, pullbacks are a part of the fabric of the market," said Larry Adam, chief investment officer at Raymond James.

Further rate cuts in question

With expectations of higher inflation and slower growth, the Federal Reserve is likely to continue its pause on interest rate cuts and shine a brighter spotlight on Friday's key monthly jobs data, some experts said.

According to FactSet, economists on average predict the U.S. economy added 125,000 jobs in March, lower than February's 151,000 jobs. The unemployment rate is forecast to rise to 4.2% from 4.1%.

"Fed policymakers will maintain a reactionary stance in the coming month and will want to avoid front-running the impact of tariffs on output and inflation," said Daco. "We will likely see a growing fracture between those that are more concerned about the negative impact of tariffs on growth and employment and those more concerned about the risk of a de-anchoring of inflation expectations and persistently higher inflation."

In a speech in Atlanta Thursday, Fed Chair Philip Jefferson acknowledged that “significant changes in trade, immigration, fiscal, and regulatory policies currently are in process,” and “it will be crucial to evaluate the cumulative effect of these policy changes as we assess the economy and consider the path of monetary policy.” 

Corporate news

• RH shares plunged 41% for their worst day ever, after the luxury home furnishings retailer issued a weaker-than-expected outlook and said it's facing “the worst housing market in 50 years.” It said in a release "we expect a higher risk business environment this year due to the uncertainty caused by tariffs."
• Lamb Weston shares rose 10% after the company said quarterly results topped Wall Street's expectations.
• Jeep-maker Stellantis, which also owns Chrysler and Dodge, said it would immediately halt auto production at some Canadian and Mexican plants. Shares of the car maker slumped 9.41%.

Cryptocurrency

Bitcoin isn't immune to Trump's tariffs. Bitcoin mining in the U.S. has supply chain roots in Asia, which was hit hard by tariffs, Bloomberg reports. Miners' equipment deliveries have already seen delays, it said. Shares of U.S. miners like Hut 8 fell. Hut 8 dropped 11%.

Bitcoin posted its worst performance this year in the January to March period since the first three months of 2018, according to Dow Jones Market Data.

Bitcoin turned lower, last down 0.53% at $81,975.06.

This story was updated with new information.

Medora Lee is a money, markets and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.