[New York Stock Market] Sharp Drop Amid Renewed Trade War Fears Over "China Tariffs 145%"... Tariff Exemption Effect Ends

All Three Major Indices Plunge After Historic Rally
White House: "Tariffs on China Are 145%, Not 125%"
U.S.-China Tariff War and Economic Slowdown Fears Persist
30-Year U.S. Treasury Yield Up 7bp... Selling Pressure Continues

On the 10th (local time), the three major indices of the U.S. New York stock market all plunged around 5% a day after the sudden implementation of the mutual tariff suspension measure. Concerns over the U.S.-China trade war and economic slowdown intensified again due to the additional tariffs on China soaring up to 145% during Trump's second term, leading to a flood of sell-offs. The major indices gave up a large portion of the historic gains from the previous day, indicating that the U.S. 90-day mutual tariff suspension was only a 'flash effect.' The massive sell-off of U.S. Treasury bonds, considered a decisive cause of the tariff suspension, continues mainly in ultra-long-term bonds such as the 30-year bonds.

Reuters Yonhap News

On this day in the New York stock market, the Dow Jones Industrial Average (Dow) focused on blue-chip stocks closed at 39,593.66, down 1,014.79 points (2.5%) from the previous trading day. The S&P 500, centered on large-cap stocks, slid 188.85 points (3.46%) to 5,268.05, and the tech-heavy Nasdaq dropped sharply by 737.66 points (4.31%) to 16,387.31. The S&P 500 and Nasdaq indices, which recorded their largest rallies in 17 and 24 years respectively the day before, turned sharply downward just one day later.

Large technology stocks showed weakness, pulling the indices down. Apple fell 4.24%. Tesla dropped 7.27%, while Nvidia and Meta Platforms, the parent company of Facebook, slid 5.91% and 6.74%, respectively.

The market had rallied to historic levels the previous day due to the mutual tariff suspension. Although President Trump raised mutual tariffs on China to 125%, he imposed a basic 10% mutual tariff on countries other than China and suspended the remaining country-specific tariffs for 90 days, which triggered a buying frenzy. However, as tariff uncertainties persisted, investor sentiment sharply cooled within a day.

Investors' concerns about the potential escalation of U.S.-China trade conflicts widened the index declines. On this day, the White House confirmed that the total additional tariff rate imposed on China was 145%, not 125%. Previously, President Trump had raised tariffs on China, which retaliated with mutual tariffs, from the existing 34% to 84% and then to 125% in two steps. The White House explained that this was limited to mutual tariffs. When adding the tariffs imposed earlier on China for fentanyl (opioid painkillers) control?two rounds of 10% each totaling 20%?the total additional tariffs on China during Trump's second term rise to 145%.

However, President Trump left the door open for negotiations with China. At a cabinet meeting at the White House that day, he told reporters regarding the 145% tariffs on China, "There may be transition costs and issues, but the outcome will be beautiful," and added, "I want to negotiate with China." Regarding the extension of the mutual tariff suspension, he said, "We'll see what happens then," not ruling out the possibility.

Despite this, Wall Street forecasts that market volatility will continue due to tariff uncertainties.

Michael Gapen, Chief U.S. Economist at Morgan Stanley, pointed out, "The delay in tariff enforcement helps but does not reduce uncertainty," adding, "The effective tariff rate on China is also at an all-time high."

Melissa Brown, Managing Director of Applied Research at S&P Global, diagnosed, "Investors are starting to come to their senses," and said, "The 145% (tariff) could be another number tomorrow, so uncertainty is the biggest issue. The talk about tariffs and investors' perceptions are changing so much that it is very difficult to judge whether this is the bottom or the peak."

The rise in Treasury yields, cited as a decisive background for the mutual tariff suspension the previous day, continues mainly in long-term bonds. The yield on the 10-year U.S. Treasury, a global bond yield benchmark, rose 2 basis points (1bp = 0.01 percentage points) from the previous trading day to 4.41%. The 30-year U.S. Treasury yield moved around 4.86%, up 7 basis points. Recently, due to tariff uncertainties, there has been a sell-off of U.S. Treasuries, the world's safest asset, causing bond prices to fall (= bond yields to rise). This increased the pressure to liquidate trades financed by U.S. Treasuries as collateral, raising concerns about a financial crisis, prompting President Trump to announce the mutual tariff suspension measure.

The dollar is also declining. The Dollar Index, which measures the value of the U.S. dollar against six major currencies, fell 1.77% from the previous day to 100.8.

The inflation data released that morning suggested progress in inflation slowdown. According to the U.S. Department of Labor, the Consumer Price Index (CPI) for March this year rose 2.4% year-on-year. This is the lowest level in 4 years and 1 month since February 2021, falling short of both the February figure (2.8%) and market expectations (2.5%). The core CPI, excluding volatile energy and food prices, also rose 2.8% year-on-year, marking the lowest increase since March 2021. It was below the previous month (3.1%) and the forecast (3.0%). Although concerns about entrenched high inflation have somewhat eased, since this data predates the full implementation of President Trump's tariff policies, the possibility of future price rebounds remains.