A trader works on the floor at the New York Stock Exchange in New York City on Sept. 22. (Reuters)
U.S. stock markets suffered a sharp fall on Friday after President Donald Trump announced a dramatic escalation in trade tensions with China.
The President declared that tariffs on Chinese exports to the United States would rise to 100%, along with new export controls on “any and all critical software.” The move came as retaliation against Beijing’s recent restrictions on rare earth mineral exports — materials essential to global technology and manufacturing.
Wall Street Shocked by Sudden Tariff Hike
The unexpected announcement rattled global investors. The S&P 500 and Nasdaq logged their steepest one-day declines since April 10, while Treasury yields and the U.S. dollar weakened as traders sought safety.
Technology stocks bore the brunt of the sell-off. The S&P 500 technology index fell 4%, and semiconductor shares slumped by 6.3%. U.S.-listed Chinese companies also took heavy losses — Alibaba tumbled 8.4%, and JD.com fell 6.2%. Losses continued in after-hours trading, signaling further unease.
“It’s another market shock,” said Robert Pavlik, senior portfolio manager at Dakota Wealth. “Investors were already questioning high valuations, and now Trump’s surprise move has reignited uncertainty.”
Major Indexes Record Steep Losses
By the closing bell, the Dow Jones Industrial Average had fallen 878.82 points, or 1.9%, to 45,479.60. The S&P 500 lost 182.60 points, or 2.71%, ending at 6,552.51. The Nasdaq Composite plunged 820.20 points, or 3.56%, to close at 22,204.43.
The three key U.S. indexes ended the week lower, with the S&P 500 posting its largest weekly drop since May. Earlier this week, markets had hit record highs, lifted by optimism around artificial intelligence investments and expectations of further Federal Reserve rate cuts.
Globally, the MSCI index of world stocks slipped 2.11%, while European markets erased weekly gains after Trump’s late-day comments.
Investors Rush to Safe Havens
Treasury yields fell sharply as investors shifted toward safer assets. The benchmark 10-year note yield dropped 9.1 basis points to 4.057%, its lowest level in more than a month.
The ongoing U.S. government shutdown, which began October 1, has halted key economic data releases, adding another layer of uncertainty.
The U.S. dollar also retreated after Trump’s remarks. The dollar index fell 0.4% to 98.99, though it remained on track for its strongest weekly gain since September 2024. Meanwhile, the euro rose 0.38% to $1.1607, and the Japanese yen strengthened 0.86% to 151.73 per dollar.
Japanese officials expressed concern about excessive volatility in foreign exchange markets following the yen’s recent swings.
Commodities React to Trade Fears
Oil prices slid as traders feared lower global demand due to renewed trade tensions. U.S. crude dropped $2.61 to close at $58.90 a barrel, while Brent crude fell $2.49 to settle at $62.73.
In contrast, gold prices climbed back above the $4,000 mark as investors sought a safe store of value. Spot gold rose 0.85% to $4,008.74 an ounce.
European Political Moves Add to Market Unease
Adding to the week’s volatility, French President Emmanuel Macron reappointed Sebastien Lecornu as prime minister just days after his resignation. The political reshuffle contributed to a 2% weekly drop in France’s blue-chip index.
With global markets on edge and trade tensions reigniting, investors are bracing for a volatile week ahead.
