U.S. stocks dive as euphoria on Wall Street reverts to fear about U.S.-China trade war

Trader John Bishop works on the floor of the New York Stock Exchange, Thursday, April 10, 2025. (AP Photo/Richard Drew)

NEW YORK — U.S. stocks dove Thursday and surrendered a chunk of their historic gains from the day before as President Donald Trump’s trade war continues to threaten the economy.

The S&P 500 tumbled 3.5%, slicing into Wednesday’s surge of 9.5% following Trump’s decision to pause many of his tariffs worldwide. The Dow Jones Industrial Average dropped 1,014 points, or 2.5%, and the Nasdaq composite tumbled 4.3%.

• Real-time TSX market updates here

“Trump blinks,” UBS strategist Bhanu Baweja wrote in a report about the president’s decision on tariffs, “but the damage isn’t all undone.”

Trump has focused more on China, raising tariffs on its products to well above 100%. Even if that were to get negotiated down to something like 50%, and even if only 10% tariffs remained on other countries, Baweja said the hit to the U.S. economy could still be large enough to hurt expected growth for upcoming U.S. corporate profits.

The losses for U.S. stocks accelerated Thursday after the White House clarified that the United States will tax Chinese imports at 145%, not the 125% rate that Trump had written about in his posting on Truth Social Wednesday, once other previously announced tariffs were included. The drop for the S&P 500 exceeded 6% at one point.

“Everything is still very volatile, because with Donald Trump, you don’t know what to expect,” said Francis Lun, chief executive of Geo Securities. “This is really big uncertainty in the market. The threat of recession has not faded.”

China, meanwhile, has reached out to other countries around the world in apparent hopes of forming a united front against Trump. The world’s second-largest economy is also ramping up its own countermeasures to Trump’s tariffs.

The stock price of Warner Bros. Discovery, the company behind “A Minecraft Movie,” dropped 12.5% for one of Wall Street’s sharpest losses after China said Thursday it will “appropriately reduce the number of imported U.S. films.” The Walt Disney Co.’s stock sank 6.8%

A spokesperson for the China Film Administration said it is “inevitable” that Chinese audiences would find American films less palatable given the “wrong move by the U.S. to wantonly implement tariffs on China.”

That was after Trump and his Treasury secretary, Scott Bessent, sent a clear message to other countries Wednesday after announcing their pause on tariffs for most countries: “Do not retaliate, and you will be rewarded.”

The European Union said Thursday it will put its trade retaliation measures on hold for 90 days and leave room for a negotiated solution.

Thursday’s swings also hit the bond market, which had been showing encouraging signals earlier in the day that stress may be easing.

The bond market has historically played the role of enforcer against politicians and economic policies it deemed imprudent. It helped topple the United Kingdom’s Liz Truss in 2022, for example, whose 49 days made her Britain’s shortest-serving prime minister. James Carville, adviser to former U.S. President Bill Clinton, also famously said he’d like to be reincarnated as the bond market because of how much power it wields.

Earlier this week, big jumps for U.S. Treasury yields had rattled the market, so much that Trump said Wednesday he had been watching how investors were “getting a little queasy.”

Several reasons could have been behind the sharp, sudden rise in yields. Hedge funds may have sold Treasurys in order to raise cash, and investors outside the United States may be dumping their U.S. government bonds because of the trade war. Regardless of the reasons behind it, higher Treasury yields crank up pressure on the stock market and push rates higher for mortgages and other loans for U.S. households and businesses.

The 10-year Treasury yield had calmed following Trump’s U-turn on tariffs, dropping all the way back to 4.30% shortly after the release of a better-than-expected report on inflation Thursday morning. That’s after it had shot up to nearly 4.50% Wednesday morning from just 4.01% at the end of last week.

As Thursday progressed, though, the 10-year Treasury yield climbed once again and reached 4.40%.

It all demonstrates why many on Wall Street are preparing for more swings in markets, after the S&P 500 at one point nearly dropped into a “bear market” by almost closing 20% below its record.

Often, the market’s whipsaw moves have come not just day to day but also hour to hour. The S&P 500 still remains below where it was when Trump announced his sweeping set of tariffs last week on “Liberation Day.”

All told, the S&P 500 fell 188.85 points Thursday to 5,268.05. The Dow Jones Industrial Average dropped 1,014.79 to 39,593.66, and the Nasdaq composite sank 737.66 to 16,387.31.

In stock markets abroad, indexes rallied across Europe and Asia in their first chances to trade following Trump’s pause on many of his tariffs. Japan’s Nikkei 225 surged 9.1%, South Korea’s Kospi leaped 6.6% and Germany’s DAX returned 4.5%.

By Stan Choe

AP writers Yuri Kageyama, Matt Ott and Huizhong Wu contributed.