U.S. Economy

Wall Street Sinks as Trade War Fears Shake Markets

Investors react to trade war concerns and uncertainty over the US economic outlook.

A sharp sell-off hit US stock markets on Monday, driven by growing fears over the economic impact of ongoing trade tensions. The S&P 500 dropped around 2% in early trading, while the Dow Jones fell 0.9% and the Nasdaq plummeted over 3.5%.

The decline followed comments from former President Donald Trump, who avoided directly addressing recession concerns and instead spoke of a "period of transition." Commerce Secretary Howard Lutnick attempted to reassure investors, insisting the US economy would not contract, though he acknowledged that tariffs could push prices higher.

Tariffs, which increase costs on imported goods, have raised concerns about inflation and slowed economic growth. Investment manager Rachel Winter warned that Trump's tariff policies would "no doubt" contribute to rising prices. Economist Mohamed El-Erian added that markets had initially been optimistic about Trump's tax and deregulation policies but underestimated the risks of a trade war.

Stock markets in Europe also reacted negatively, with France’s CAC and the UK’s FTSE closing down 0.9%, while Germany’s DAX dropped 1.75%. Major US tech stocks suffered, with Tesla sliding 8% and Nvidia and Meta both losing over 4%.

The market turmoil comes as new retaliatory tariffs from China take effect, targeting US agricultural exports like soybeans, wheat, and pork. Canada’s Ontario province also announced a 25% surcharge on energy exports in response to US tariffs, warning of further measures if tensions escalate.

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