Markets thought they had a serious debt problem. Now they have a trade war problem to worry about again.
Stocks fell Friday after President Donald Trump brought the trade war back to the forefront with threats of massive tariffs against America’s most valuable company and one of its most important trading partners.
In quick succession, Trump posted on Truth social Friday morning that he would impose a 25% tariff on Apple if it refused to make iPhones in the United States. Minutes later, Trump said he would recommend a 50% tariff on goods imported from the European Union.
The Dow opened lower by 480 points, or 1.15%. The broader S&P 500 was down 1.2%, and the tech-heavy Nasdaq Composite slid 1.58%.
Wall Street’s fear gauge, the CBOE Volatility Index, surged 23%.
The US dollar index, which measures the dollar’s strength against six major foreign currencies, slid 0.6%. Gold, a safe haven during uncertainty, surged 1.7%.
Wall Street in recent weeks had begun to shift focus away from tariffs and toward Trump’s tax bill — its own headache for markets — after the United States and China in May opened trade negotiations and agreed to substantially lower tariffs, easing investors’ nerves about the trade war.
But Trump’s new threat of tariffs on the EU was a sharp reminder that policy uncertainty remains. David Doyle, head of economics at Macquarie, said in a recent note that it is not “all-clear” on the trade war front, and tariffs remain a “substantial headwind” to the US economy.
The S&P 500 sank in early April after Trump announced massive “reciprocal” tariffs, and rebounded sharply after the president a week later announced a 90-day pause on most of them. Investors have been on edge about potential developments during the 90-day pause, which is set to end in July.
The United States so far during the 90-day pause has only announced a trade deal with the United Kingdom.
Apple (AAPL) on Friday dropped almost 3% after Trump’s threat to impose tariffs on the company’s products unless it moves manufacturing to the United States. The tech giant has tumbled 20% this year as it has been caught in the crossfire of Trump’s trade war.
The tariff jolt on Friday comes after markets this week have already been floundering under pressure from the bond market. Investors this week balked at Trump’s “big, beautiful” tax bill, and weak demand for US government bonds sent yields surging.
“Markets are looking for a little more fiscal discipline, they’re concerned,” Federal Reserve Governor Chris Waller told Fox Business on Thursday.
“There does seem to be, you know, a risk-off on American assets across the board, not just government debt, but everything,” Waller said. “And whether that continues in the future or not, I don’t know.”
The yield on the 10-year Treasury note on Friday fell below 4.5% as investors snapped up bonds amid renewed trade uncertainty.
In Europe, markets tumbled after Trump’s threat of a higher tariff for the region that could go into effect June 1. The benchmark STOXX 600 index was down 1.6%. Germany’s DAX fell 2.1% and France’s CAC index slid 2.6%.
The S&P 500 is coming off of three days in the red as a recent rebound in US markets has stalled. The benchmark index is down slightly on the year.
This is a developing story and will be updated.
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