Three days ago, the United States (U.S.) President Donald Trump imposed tariffs on countries around the world, and the New York Stock Exchange has once again experienced a drop.
Namely, trading on Wall Street began with a sharp decline. The New York Stock Exchange opened at 3:30 p.m. Central European Time, and significant losses in the banking sector were recorded within the first minutes of trading.
The S&P stock index recorded a drop of 2.5 percent, while the tech-heavy Nasdaq was down 2.7 percent. Tesla, owned by Trump’s close ally Elon Musk, fell by nearly 4 percent in the first minutes of trading, while Apple was down more than 3 percent.
JP Morgan Chase fell by 5 percent, Bank of America by 4.3 percent, and Wells Fargo lost 3.5 percent in value.
What does this actually mean?
When it comes to U.S. markets, analysts, traders, and journalists mostly follow three main stock indices: the Dow Jones Industrial Average tracks 30 of the largest U.S. companies – these are the so-called blue-chip stocks – firms with long-term stability and strong financial results; the Standard & Poor’s 500 (better known as the S&P 500) tracks stock price movements of 500 leading companies and is considered by many the best indicator of the state of the U.S. corporate sector; the Nasdaq index includes around 3.500 companies with an emphasis on the technology sector. Because of this, any major jump or drop in tech stocks strongly affects the Nasdaq.
Declines in all three indices in the early hours of trading signal serious concern among investors over the trade conflict between the U.S. and China.
Why are stock markets followed so closely?
In the business world, stock indices are considered leading indicators – a signal investors use to assess the future prospects of the companies whose stocks are being traded.
And the current message from the markets is clear – it’s not good. The reason is the tariffs, which introduce a new cost, and someone has to pay that cost. If the company absorbs it itself, profits suffer. If it passes it on to consumers, it risks a drop in sales. And a drop in sales slows down business – and ultimately hits the broader economy.
Since Trump’s tariffs are both high and apply to a large number of countries, investors are assessing that the negative effects will be felt across various sectors of the economy – and very soon.
China quickly retaliated, and the whole situation suits Trump
China responded by introducing a 34% tariff on all imports from the U.S., announced a lawsuit, and imposed additional restrictions on U.S. companies cooperating with Taiwan or representing, as Beijing claims, a security risk.
Shortly after that, Trump commented in his usual manner on China’s countermeasures in the trade war.
“China made a mistake, they panicked, and that’s one thing they can’t afford!” Trump posted on the Truth Social platform.
In addition, Trump claims that the imposition of tariffs is going very well and that the markets will thrive under his new plan, even though the Dow Jones, Nasdaq, and S&P have dropped sharply.
“Great numbers, better than expected. Everything is already working. We can’t lose. Message to many investors – my policies will never change. This is a great time to become richer, richer than you’ve ever been before,” said Trump.
