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U.S. stock markets took a hard hit on Thursday as fears surrounding President Donald Trump’s ongoing trade battles with major global partners spooked investors once again. All three major indexes—S&P 500, Dow Jones Industrial Average, and Nasdaq—closed deep in the red, losing nearly all the momentum they had gained just a day earlier.
The Nasdaq dropped the most, falling 4.3%, while the S&P 500 slid 3.5%. The Dow wasn’t spared either, sinking by 2.5%.
This sharp selloff came just a day after a temporary lift in sentiment when Trump announced a 90-day pause on certain tariffs. But investors are still on edge, especially as tariffs on goods from China, Mexico, and Canada remain in place. These countries are major trade partners and supply a big chunk of U.S. imports.
Investors Left in the Dark
While the U.S. has temporarily paused a 26% tariff on India until July, broader trade tensions are still weighing heavily on the market. With new taxes still hitting imports from China and others, businesses are facing months of uncertainty.
That uncertainty isn’t just making investors nervous—it’s also affecting consumer behavior, business spending, and investment plans, according to economists. The Federal Reserve has warned that these trade policies could slow down the economy and increase inflation at the same time, creating a difficult environment for setting interest rates or guiding monetary policy.
Fed Warns of Tougher Days Ahead
Federal Reserve officials made it clear this week that they’re watching the situation closely. Even though Trump’s 90-day pause might offer some breathing room, it doesn’t erase the deeper issues.
“It appears as though we have seen a marked increase in the upside risks around inflation along with elevated downside risks to the outlook for employment and growth,” said Kansas City Fed President Jeff Schmid on Thursday.
Echoing similar concerns, Dallas Fed President Lorie Logan said, “To sustainably achieve both of our dual-mandate goals, it will be important to keep any tariff-related price increases from fostering more persistent inflation.”
White House Stands by Tariffs, Says Economy Still Strong
Despite the market downturn and growing economic worries, the White House continues to defend its trade policy. Press Secretary Karoline Leavitt told the BBC that the administration’s approach is about protecting American jobs and industries.
“It’s the policy of this White House… to put America first and bring back jobs,” she said. “The US will no longer allow China to dump cheap foreign products into the country, while blocking American-made goods from entering Chinese markets.”
She added, “America cannot exist if we continue to enrich and embolden China.” Leavitt also expressed optimism about the economy, saying companies would be “best served” by doing business within the United States.
Trump Says “Transition Problems” Are Expected
President Trump, speaking Thursday, acknowledged the market slump and said the country should expect some bumps along the way as his tariff strategy plays out.
“There will always be transition problems,” Trump said. “Difficulty” is part of the process, he explained, but he remained hopeful that a deal with China was still possible.
“I think we’ll work something out that’s good for both countries. I’m looking forward to it,” he said.
His remarks came just hours after the White House confirmed that certain Chinese products—especially those related to the drug fentanyl—will now face tariffs as high as 145%, thanks to an added 20% duty.
Fresh Pause on Some Tariffs—but Not All
The temporary 90-day break on new “reciprocal” tariffs was announced Wednesday and applies to all countries except China, Hong Kong, and Macau. But that doesn’t mean everything is on hold.
The standard 10% baseline tariff on many goods remains in place, and earlier tariffs—like the 25% tax on steel and aluminum (effective since March 12) and auto tariffs (from April 3)—are still active.
A separate executive order issued by the White House also confirmed that the 26% tariff on goods from India would be paused until July 9.
Markets Had Surged Just One Day Before
Ironically, just a day before Thursday’s slump, stock markets had seen a massive rally after news of the 90-day tariff pause broke. The S&P 500 had jumped 9.5%—its best single-day performance since the 2008 financial crisis—while the Nasdaq soared 12.2%, marking its second-biggest daily gain ever.
But that optimism didn’t last long. With no clear path ahead on trade, and with more tariffs looming if deals aren’t reached, markets quickly reversed course.
More Tariffs If Deals Don’t Happen, Says Trump
During a Cabinet meeting, Trump made it clear that the tariff pause could be extended—but only if he gets the trade deals he wants. If not, the higher tariffs will come back.
“That’s what would happen,” he said. “It’s got to be beneficial for both parties.” When asked directly if he would extend the pause, Trump said, “We’ll have to see what happens.”
He also hinted that the money collected from tariffs would go toward reducing the national debt. “Higher tariffs would go back in place if trade deals are not made…First deal on tariffs very close. Not considering exceptions…Would use money from tariffs to pay down debt,” he said.
