Stocks are making wild swings as markets assess damage from Trump’s trade war

US stocks are swinging on Monday following a manic morning where indexes plunged, soared, and then sank again as Wall Street tossed around a false rumour about US President Donald Trump’s plans for his trade war. Some investors are holding on to hope that Trump may still lower his tariffs after negotiating with other countries, and Trump said on Sunday that he has heard from leaders “dying to make a deal”. Countries are scrambling to figure out how to respond to the tariffs, with China and others retaliating quickly. Trump’s tariff blitz fulfilled a major campaign promise as he acted without Congress to redraw the rules of the international trading system. It was a move decades in the making for Trump, who has long denounced foreign trade deals as unfair to the US. The higher rates are set to be collected beginning on Wednesday, ushering in a new era of economic uncertainty with no clear end in sight. After trading began, the S&P 500 quickly sank 4.7 per cent, following even worse drops for financial markets worldwide amid worries that Trump’s tariffs could torpedo the global economy. But it suddenly erased all of it and surged to a gain of 3.4 per cent, which would have counted as its best day in years. Almost as quickly, the index that sits at the heart of many investors’ 401(k) accounts gave that up and was roughly flat in midday trading. Other US stock indexes also careened through shocking trading. The Dow Jones Industrial Average went from a loss of 1,700 points to a leap of nearly 900 before settling at a loss of 272 points, or 0.7 per cent, as of 11am. The Nasdaq composite was 0.7 per cent higher. The swings shook the market as a White House social media account said a rumour circulating that Trump was considering a 90-day pause on his tariffs was “fake news”. The intense and sudden moves show how hard financial markets are straining to see hopes that Trump may let up on his stiff tariffs, which economists see raising the risks of a global recession. Minutes before the markets opened in New York, Trump posted on social media that his tariff reforms were “a chance to do something that should have been done decades ago”. “Don’t be Weak! Don’t be Stupid! … Be Strong, Courageous, and Patient, and GREATNESS will be the result!” he urged. On Sunday, Trump told reporters aboard Air Force One that he does not want markets to fall. But he also said he was not concerned about a sell-off, saying “sometimes you have to take medicine to fix something”. Trump has given several reasons for his stiff tariffs, including to return manufacturing jobs to the United States, which is a process that could take years. Trump on Sunday said he wanted to bring down the numbers for how much more the US imports from other countries versus how much it sends to them. “The recent tariffs will likely increase inflation and are causing many to consider a greater probability of a recession,” JPMorgan CEO Jamie Dimon wrote in his annual letter to shareholders on Monday. He is one of the most influential executives on Wall Street. “Whether or not the menu of tariffs causes a recession remains in question, but it will slow down growth.” The financial pain once again hammered investments around the world. Stocks in Hong Kong plunged 13.2 per cent for their worst day since 1997. A barrel of benchmark US crude oil briefly dropped below US$60 for the first time since 2021, hurt by worries that a global economy weakened by trade barriers will burn less fuel. Bitcoin sank below US$80,000, down from its record above US$100,000 set in January, after holding steadier than other markets last week. Trump’s tariffs are an attack on the globalisation that has remade the world’s economy, which helped bring down prices for products on the shelves of US stores but also caused production jobs to leave for other countries. It also adds pressure on the Federal Reserve. Investors have become nearly conditioned to expect the central bank to swoop in as a hero during downturns. By slashing interest rates to make borrowing easier for US households and companies, along with other more untraditional moves to juice the economy, the Fed helped the US economy recover from the 2008 financial crisis, the 2020 Covid-19 crash and other bear markets. But the Fed may have less freedom to act this time around because the conditions are so much different. For one, instead of a coronavirus or a system built up on too much belief that US home prices would keep rising, this market downturn is mostly because of economic policy from the White House. Perhaps more importantly, inflation is also higher at the moment than the Fed would like. And while lower interest rates can goose the economy, they can also put upwards pressure on inflation. Expectations for inflation are already swinging higher because of Trump’s tariffs, which would likely raise prices for anything imported. “The idea that there’s so much uncertainty going forward about how these tariffs are going to play out, that’s what’s really driving this plummet in the stock prices,” said Rintaro Nishimura, an associate at the Asia Group. All the tumult has dragged the S&P 500 close to 20 per cent below its record, which it set less than two months ago. If it finishes the day below that mark, it would be a big enough drop that Wall Street has a name for it. A “bear market” signifies a downturn that has moved beyond a run-of-the-mill 10 per cent drop, which happens every year or so, and has graduated into something more vicious. The index is coming off its worst week since the Covid-19 pandemic began crashing the global economy in March 2020. Nathan Thooft, chief investment officer and senior portfolio manager at Manulife Investment Management, said more countries are likely to respond to the US with retaliatory tariffs. Given the large number of countries involved, “it will take a considerable amount of time in our view to work through the various negotiations that are likely to happen”. “Ultimately, our take is market uncertainly and volatility are likely to persist for some time,” he said. Additional reporting by Agence France-Presse

Stocks are making wild swings as markets assess damage from Trump’s trade war

Trump’s tariff blitz fulfilled major campaign promise as he acted without Congress to redraw rules of the international trading system

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