2025-04-10T20:02:07.000Z

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On Thursday, Wall Street experienced a significant downturn as a brutal sell-off resumed, fueled by warnings from banks and investors that President Donald Trump's tariffs could potentially drive the United States into a recession. This alarming scenario unfolded despite the president's recent decision to step back from an all-out trade war, contributing to a complex economic landscape.

The S&P 500, which serves as one of Wall Streets key benchmark indices, plummeted by 3.5 percent during a session characterized by extreme volatility. This drop marked a sharp contrast to the previous days substantial 9.5 percent surge. Overall, Wall Street's benchmark index is now down 6.1 percent for the month of April alone, reflecting ongoing market instability.

Meanwhile, the technology-heavy Nasdaq Composite index also took a hit, falling by 4.3 percent following its significant gain the previous day, which had been the best performance since 2001. In the currency markets, the dollar index, which measures the value of the US dollar against a basket of six major currencies, fell by 1.9 percent. This decline is indicative of a growing flight from US assets, leading to rallies in currencies such as the Japanese yen, euro, and British pound.

Wednesday had brought a brief reprieve for investors when Trump announced a 90-day pause on the steep reciprocal tariffs imposed on several countries. This temporary relief had allowed markets to rally, but analysts were quick to caution about the broader implications of Trumps trade strategies. With tariffs on Chinese imports set as high as 145 percent and a 10 percent universal tariff still in effect, many financial experts warned that these measures posed serious risks for the American economy.

JPMorgan, one of the largest banks in the US, conveyed a grim outlook in a note to clients, stating, Combined with the ongoing policy chaos on trade and domestic fiscal matters, along with the still-large losses in equity markets and hit to confidence, it remains difficult to see the US avoiding recession. Similarly, Goldman Sachs advised that it was too early for the all clear, cautioning that while some immediate risks had diminished, high levels of policy uncertainty would likely continue to dampen consumer and business activities.

On Thursday, the selling pressure on US Treasuries intensified, leading to a rise in the yield on the benchmark 10-year note, which increased by 0.1 percentage points to 4.4 percent, hovering just below the weeks peak levels.

Amid these market fluctuations, President Trump held a televised cabinet meeting at the White House. When Treasury Secretary Scott Bessent was questioned about the market's decline, he remarked, I dont see anything unusual today, a statement made shortly after Trump claimed he had not been following the markets closely.

During the meeting, Trump expressed his desire to negotiate with China, stating, We would love to be able to work a deal. Theyve really taken advantage of our country for a long period of time. He also indicated his readiness to reinstate broad reciprocal tariffs if other nations declined to negotiate new trade agreements with the United States.

In a retaliatory move, China implemented its additional 84 percent tariffs against American imports as scheduled, pushing its total levy on US goods to over 100 percent. President Xi Jinping's administration has signaled it will not back down in the escalating trade conflict, though it has yet to respond to Trumps even higher tariff rates.

Chinas commerce ministry declared, If you want to talk, the door is open, but the dialogue must be conducted on an equal footing on the basis of mutual respect. If you want to fight, China will fight to the end. Pressure, threats, and blackmail are not the right way to deal with China. This statement underscores the tense atmosphere surrounding US-China relations.

As a result of these escalating tensions, the Chinese renminbi weakened to its lowest level since 2007, indicating that Beijing is prepared to allow a gradual depreciation of its currency in response to US tariffs.

The repercussions of the widening trade war between the worlds two largest economies were felt across various markets, with oil prices dropping again on Thursday. The international benchmark Brent crude settled down by 3 percent, closing at $62.33 a barrel, while West Texas Intermediate crude settled at $60.07 a barrel. Analysts have warned that these price declines could pose a threat to the United States' booming shale sector.

The ongoing trade dispute with China has elevated the average US tariff on imports from the Asian powerhouse to an alarming 134.7 percent, according to the Peterson Institute for International Economics. An analysis from the Yale Budget Lab further revealed that American consumers are currently facing a tariff rate of 27 percent, the highest since 1903, when considering both domestic tariffs and those imposed on imports.

Analysts like Bill Campbell, global bond portfolio manager at DoubleLine, have expressed that the uncertainty surrounding Trumps trade policies is likely to pose challenges for markets and macroeconomic forecasts in the upcoming months. He noted, Overhanging uncertainty on tariffs will complicate business decision-making with respect to strategic issues such as where to maintain or relocate production facilities; cyclical issues such as the management of payrolls and layoffs; and capital spending.