US markets plunged overnight, posting their steepest one-day losses since 2020, as investors reacted to President Donald Trump’s sweeping new tariffs and the prospect of a prolonged global trade war. The Dow Jones Industrial Average dropped 1,679 points, or 3.98%, to close at 40,545.93. The S&P 500 fell 4.84% to 5,396.52, returning to correction territory, while the Nasdaq Composite sank 5.97% to 16,550.61. More than 400 of the S&P 500’s constituents ended the day in the red, with losses concentrated in technology, consumer goods, and financials.
President Trump’s tariff package imposes a baseline 10% duty on all imports, effective April 5, with much higher rates—up to 54% for China—on countries deemed to impose unfair barriers on US goods. The White House defended the measures as necessary to restore trade balance. “It was an operation,” Trump said, “like when a patient gets operated on. The markets are going to boom.”
Multinationals and banks hit hardest
The sell-off was broad, but the most severe pain was felt among large multinationals and import-heavy retailers. Nike plunged 14%, Apple dropped 9%, and Tesla shed over 5%. Retailers like Gap and Five Below, reliant on imported goods, collapsed by 20% and 28% respectively. Bank stocks also sank as fears of an economic slowdown mounted—Citigroup and Bank of America dropped over 12% and 11% respectively, while regional banks saw even steeper losses.
Small-cap stocks entered a bear market, with the Russell 2000 index now more than 21% below its recent highs. Investors fled to safer assets, driving the 10-year Treasury yield below 4%. Meanwhile, Fitch Ratings estimated the effective tariff rate now stands at 25%—the highest in over 115 years—warning that it raises the risk of a US recession and limits the Federal Reserve’s ability to cut rates.
Global reaction and looming retaliation
The tariffs have sparked alarm worldwide. The European Union has confirmed it is preparing countermeasures, with leaders vowing a “proportional” and “unified” response. China has promised “resolute retaliation” and is expected to target key US exports. France has called for a suspension of new investments in the US, while Spain, Ireland, and Germany have voiced strong opposition. Several US allies, including South Korea, Mexico, and India, have said they will hold off on retaliation for now—but are seeking concessions before tariffs take effect on April 9.
Oil prices also dropped overnight on concerns about slowing global growth and an unexpected decision by OPEC+ to ramp up production starting in May. Meanwhile, volatility spiked—Wall Street’s “fear gauge,” the VIX, surged above 29, well into alarm territory.
Economic indicators
Investors will be watching as Federal Reserve Chair Jerome Powell speaks on the US economic outlook on Friday morning (Saturday AEDT). US non-farm payrolls data is also due later that evening, expected to show slowing job growth and a rise in unemployment.
Commodities and the dollar
Brent crude is trading 6.71% lower at US$69.92 a barrel.
Spot gold is trading 1.09% lower at US$3,131.60 an ounce.
One Australian dollar is buying 63.25 US cents, up 0.41%.
Futures
Australian shares are set to extend their losses today, following the $3.1 trillion wipeout on Wall Street.
The SPI futures are pointing to a 93 point fall.