Wall Street took another deep dive on Thursday as President Trump’s escalating trade war with China continued to unnerve investors and shake financial markets. After a short-lived market rally Wednesday, optimism quickly evaporated when Trump doubled down on tariffs this time hitting Chinese goods even harder.
All three major indexes reversed much of their recent gains. The Dow Jones Industrial Average plunged more than 1,000 points, closing the day down 2.5 percent. The S&P 500 tumbled 3.5 percent, and the Nasdaq slid a steep 4 percent, erasing a large chunk of Wednesday’s rally, which had been sparked by Trump’s decision to temporarily scale back tariffs on dozens of U.S. trading partners.
That brief sense of relief didn’t last long. By Thursday, Trump had not only returned to his hardline stance but dramatically raised tariffs on Chinese imports, increasing the so-called “reciprocal” rate to 125 percent. For some goods, the effective tax rate now reaches 145 percent a level analysts warn could effectively shut down U.S.-China trade.
While the White House painted the rollback on other countries as a clever negotiating tactic, the decision to turn the full weight of the tariff war on China has experts sounding alarms. Many Americans already concerned about inflation are bracing for the price hikes that economists say are now all but guaranteed.
Prices on everyday consumer goods like electronics, clothing, and household items are expected to rise sharply as import costs surge. At the same time, U.S. farmers are likely to face serious financial losses as China responds with retaliatory tariffs on American exports like soybeans, pork, and seafood sectors already under pressure.
According to Census Bureau data, the U.S. imported over $439 billion in goods from China last year, making it one of America’s largest trading partners. Now, with tariffs this high, that trade relationship could grind to a halt.
“Duties on China are shooting up to levels so absurd that most U.S.-China trade will come to a halt. A surge in core goods prices this summer looks inevitable,” wrote economists at Pantheon Macroeconomics in a note Thursday.
Trump’s renewed aggression has sparked criticism not only from Democrats but also from within his own party. Public polling suggests his trade policies are growing increasingly unpopular with American voters, many of whom are feeling the financial pinch as markets slide and prices climb.
Democrats wasted no time calling out what they view as chaos of the president’s own making. Senate Minority Leader Chuck Schumer compared the situation to “self-made destruction,” dismissing Trump’s tariff strategy as lacking foresight or discipline.
Further complicating matters, Democratic lawmakers are now demanding an ethics investigation into whether anyone close to Trump benefited financially from Wednesday’s market surge triggered by Trump’s sudden announcement that he was delaying new tariffs on countries like Canada, Mexico, and members of the European Union.
Trump, for his part, encouraged Americans on social media to “BE COOL” and buy stocks just before markets spiked comments now under scrutiny amid concerns over potential insider trading.
Meanwhile, the president has offered no clear plan for what happens next with China. Despite saying he’d “love to work a deal,” he gave no indication Thursday of any new diplomatic effort. His remarks instead focused on blaming China for past economic grievances and framing his tariff hike as a long-overdue correction.
“We’re just resetting the table,” Trump said. “And I’m sure we’ll be able to get along very well.”
But on Wall Street and beyond, uncertainty is growing and confidence in the president’s handling of trade is eroding. With stock prices sinking, inflation fears mounting, and global relationships fraying, the real cost of Trump’s economic war may be just beginning to hit home for everyday Americans.