By John Towfighi, NCS
New York (NCS) — US shares dropped decrease Friday after President Donald Trump threatened to hike tariffs on imports from China, reigniting fears of a trade war that rocked international markets earlier this 12 months.
The Dow was down 600 points, or 1.3%. The broader S&P 500 fell 1.9% and the tech-heavy Nasdaq Composite fell 2.6%.
The Dow was set for its worst day since June. The S&P 500 and Nasdaq had been on observe for his or her worst day since April.
Trump mentioned in a social media submit he’s contemplating a “massive increase” in tariffs on imports from China, including “There is no way that China should be allowed to hold the World ‘captive’” over uncommon earth exports.
His newest risk stems from accusations that China is imposing export controls on uncommon earths, slow-walking earlier agreements to free them up for US companies. Because of that, Trump mentioned he no longer sees a need to meet with President Xi Jinping later this month on the Asia-Pacific Economic Cooperation summit in South Korea.
US shares had been hovering close to file highs. Wall Street in latest months has tried to look previous issues about tariffs, as a substitute focusing on better-than-expected company earnings.
The president’s submit on Truth Social jolted markets, sending Wall Street’s worry gauge, the CBOE Volatility Index, hovering by 33%.
AI and chip shares which are delicate to developments in US-China trade relations dropped decrease. Nvidia (NVDA) and Advanced Micro Devices (AMD) fell 2.5% and 6%, respectively.
Wall Street in latest weeks has additionally been worried about valuations of AI and tech shares, leaving them extra weak to a shock.
“When you have a shock like today with President Trump, they are going to get hit the most because they’re the most at risk to the economic outlook worsening or corporate earnings retreating due to a potential slowdown,” mentioned José Torres, senior economist at Interactive Brokers.
Meanwhile, US-based uncommon earth mining and processing corporations jumped greater. USA Rare Earth (USAR) and MP Materials (MP) soared 14.5% and 12.6%, respectively.
Bonds rally, oil costs drop
US Treasuries rallied as buyers rushed into safer belongings amid market volatility and issues {that a} reignited trade war may hit financial development.
10-year and 30-year Treasury yields fell as buyers scooped up bonds.
Gold and silver, that are thought of secure havens amid turmoil, initially jumped as a lot as 1.5% and a couple of.2%, respectively, earlier than paring positive factors.
“Trump is sparking risk-off sentiments in markets after declaring the potential for massive tariff hikes on China,” Torres mentioned. “Investors are clamoring for safe haven holdings as a heavy increase in levies could weigh on the earnings picture and the economic outlook ahead.”
US oil costs slumped 4% and Brent crude dropped 3.6%. Oil costs had been buying and selling decrease earlier partially as a consequence of ceasefire developments between Israel and Hamas.
Robert Yawger, commodity specialist at Mizuho Securities, mentioned the flare up in tensions between Trump and Xi stoked issues of a “demand destruction event,” the place a trade war weighs on financial development and demand for oil.
“It’s a mini mirror image of what happened in April,” Yawger mentioned, referring to the slump in oil prices within the spring when buyers had been elevating forecasts of a attainable recession.
NCS’s Fear and Greed index dropped from “neutral” into “fear” for the primary time since May.
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NCS’s Elisabeth Buchwald and Matt Egan contributed reporting.