The leading U.S. stock indexes tumbled Wednesday as President Trump’s delay on some new Chinese tariffs failed to soothe investors worried that the administration’s trade war will drive the country into a recession.
The blue-chip Dow Jones industrial average sank 800 points, or 3.1%, to 25,479, while the broader S&P 500 dropped 2.9% as a bond-market recession gauge signaled rising risk of a downturn. The tech-heavy Nasdaq fell 3%.
All three indexes have given up much of their gains over the past two years as global growth slows and confusion about trade policy curbs hiring and investment in new plants and stores.
The United States has imposed tariffs on $250 billion of goods from China, the world’s second-largest economy, and threatened 10% duties on the remaining $300 billion, though the Trump administration has since delayed some of those until Dec. 15 and canceled others. The White House has also imposed levies on washing machines, solar panels, steel, and aluminum and threatened them on cars, car parts, and French wines.
While markets rallied after the delay was announced, the decision “does not greatly improve the outlook,” said Mark Haefele, global chief investment officer for the wealth management business at Swiss lender UBS.
“Tuesday’s announcement makes it clearer in our view that President Trump really intends to implement the tariffs first threatened in a tweet on Aug. 1,” said Haefele. “Rather than a negotiating tactic, the tweet was what it appeared to be: another escalation of the trade dispute.”
Economists at Bank of America see a 1-in-3 chance of a downturn within the next year as tariffs drive up consumer costs and restrain business spending, while the Federal Reserve finds itself with a more limited toolkit to fight the decline. Interests rates are already low, and the central bank’s balance sheet is still carrying the bulk of trillions of dollars in securities purchases made to goose the economy after the 2008 financial crisis.
