[New York Stock Market] Seizure from Mutual Tariff Shock... Nasdaq Down 6% on 'Black Thursday'

Trump Imposes '10% + Alpha' Reciprocal Tariffs Worldwide
Panic Selling Spreads on Fears of Recession and Trade War
S&P Down 4.84%, Dow Down 3.98%... Largest Drop in Five Years

The three major indices of the U.S. New York stock market plunged simultaneously on the 3rd (local time), the day after President Donald Trump unleashed a barrage of reciprocal tariffs against countries worldwide. The tariff rates far exceeded Wall Street's initial expectations, triggering a massive sell-off, with the S&P 500 and Nasdaq indices recording their largest declines in five years. As fears grew that the Trump-induced tariff war could push the U.S. economy into a recession, the value of the dollar and international oil prices plummeted, while a flight to safe-haven assets drove up government bond prices.

Reuters Yonhap News

On that day in the New York stock market, the blue-chip-focused Dow Jones Industrial Average (Dow) closed at 40,545.93, down 1,679.39 points (3.98%) from the previous trading day, marking its largest drop since June 2020. The large-cap-focused S&P 500 index plunged 274.45 points (4.84%) to 5,396.52, and the tech-heavy Nasdaq index slid 1,050.44 points (5.97%) to 16,550.6. Both indices experienced their steepest declines since June 2020 and March 2020, respectively, marking the worst day for the markets.

By individual stocks, Nike, which relies heavily on overseas production, fell sharply by 14.4%. Apple, which produces the most iPhones in China, dropped 9.25%. Discount retailers primarily selling imported goods, Five Below and Dollar Tree, slid 27.8% and 13.3%, respectively. Apparel company Gap fell by as much as 20.3%. Due to risk aversion, tech stocks also joined the sell-off, with Nvidia and U.S. electric vehicle maker Tesla declining 7.8% and 5.5%, respectively.

The reciprocal tariffs sparked fears of an economic recession, triggering a flood of sell orders. President Trump announced the day before at the White House Rose Garden that reciprocal tariffs of at least 10% would be imposed on all trading partners worldwide. A basic tariff of 10% will be applied to all countries, followed by an additional '10% + α' tariff on so-called 'worst offender' countries deemed to have high trade barriers, including both tariff and non-tariff barriers. The 10% basic tariff will take effect on the 5th, and the individual '＋α' tariffs will be implemented on the 9th.

Despite the tariff shock causing a 'seizure' in the New York stock market, President Trump remained determined to push forward with the tariff offensive, asserting that the market would prosper. Speaking to reporters at the White House that afternoon, he said, "The market, the stocks, and the country will prosper," adding, "The rest of the world wants to know if there is a way to do business with us." Earlier that day, on his self-created social media platform Truth Social, he wrote, "The surgery is over," and "The patient survived and is healing," metaphorically referring to the U.S. as the 'patient' and the reciprocal tariffs as the 'surgery,' signaling his resolve to lead the recovery and rebuilding of the ailing U.S. economy through tariff policies.

Wall Street is flooded with warnings that the reciprocal tariffs imposed by President Trump could bring about a U.S. economic recession. Investment bank Barclays forecast that due to the impact of reciprocal tariffs, the U.S. GDP growth rate in 2025 will be -0.1%, indicating a contraction. Inflation is expected to reach 3.7%, significantly exceeding the monetary authorities' target of 2%. UBS predicted that the U.S. economy would enter a technical recession, shrinking for two consecutive quarters. Michael Feroli, JP Morgan's chief U.S. economist, also noted that inflation could rise by an additional 1.5 percentage points this year due to reciprocal tariffs, which would suppress consumption and bring the U.S. economy dangerously close to recession. He particularly pointed out that the average effective tariff rate announced by President Trump exceeds 23%, the highest level since World War I, when protectionism was rampant.

Mary Ann Bartels, senior investment strategist at Sanctuary Wealth, described the level of reciprocal tariffs announced the previous day as "the worst-case scenario, which was not priced into the market," adding that "a risk-averse reaction is emerging in the market." She further predicted that the S&P 500 index could fall by 5-10%, potentially bottoming out in the 5,200-5,400 range.

Due to concerns over a global trade war and economic recession, demand for safe-haven bond investments surged, causing bond prices to rise and yields to fall sharply. The 10-year U.S. Treasury yield, a global bond yield benchmark, dropped 15 basis points (1 bp = 0.01 percentage points) from the previous trading day to 4.04%, while the 2-year U.S. Treasury yield, sensitive to monetary policy, plunged 19 basis points to 3.7%.

Amid recession fears, the value of the dollar and international oil prices declined. The dollar index, which measures the dollar's value against six major currencies, fell 1.76% to 101.67 from the previous day. International oil prices plummeted more than 6%. West Texas Intermediate (WTI) crude oil closed at $66.95 per barrel, down $4.76 (6.64%) from the previous day, while Brent crude, the global oil price benchmark, ended at $70.14 per barrel, down $4.81 (6.42%).