Investing.com--U.S. stocks traded lower mid-day Monday after President Trump escalated trade tensions further by announcing that the U.S. will impose additional tariffs of 50% on China if they do not drop their new 34% tarrif on U.S. imports by tomorrow.
Earlier in the session, stock saw a brief reprieve on unconfirmed reports that U.S. President Donald Trump was considering pausing his sweeping trade tariffs for 90 days on all countries except China. The White House later debunked this as "fake news", but the short-term jump in stocks illustrates the jitteriness of the market after two brutal days of selling.
At 11:36 AM ET, the Dow Jones Industrial Average dropped 674 points, or 1.8%, the S&P 500 index fell 64 points, or 1.3%, while the NASDAQ Composite fell 172 points, or 1.1%.
Trump, in a post on Truth Social media shortly after 11 AM ET, stated that the United States will impose an additional 50% tariff on Chinese goods if China does not rescind its recent 34% tariff hike by April 8, 2025. This ultimatum follows China’s retaliatory tariffs and other trade practices that Trump has labeled as abusive.
The Trump post followed a short degree of optimism after an unconfirmed rumor on social media indicating that Trump was considering a 90-day pause to his sweeping tariffs regime for all countries, with the exception of China. The White House quickly denied such rumors, calling them "fake news."
The benchmark indices had opened sharply lower Monday, continuing the selloff seen at the end of last week, which had seen the broad-based S&P 500 index tumble over 10%, erasing nearly $5 trillion in market value, marking its most significant two-day loss since March 2020, the onset of the COVID-19 pandemic.
President Trump said on Sunday that his new tariffs are the only way to fix major trade deficits with China and the European Union, declaring that duties will stay in place and investors must endure the consequences and that he would refrain from negotiating with China until the U.S. trade deficit is addressed.
He announced last week the implementation of a 10% universal import tariff, which came into effect April 5, with additional higher tariffs on major trade partners, including China, Vietnam, Japan, and the European Union, set to take effect on April 9.
In response to the U.S. tariffs, China has imposed matching 34% duties on American goods, further intensifying the trade conflict.
The European Union is also seeking unity among its member states to formulate a coordinated response, potentially leading to additional retaliatory measures.
These developments have heightened fears of a global trade war, with significant implications for international commerce and economic stability.
Goldman Sachs lifted on Sunday its odds of a 2025 recession to 45% from 35% a week ago, after hiking its recession forecast last week. This follows JPMorgan raising last week the probability of a global recession this year to 60%, from the previous 40%.
Investors are showing signs of extreme nervousness, with the CBOE Volatility Index ( VIX ) - the most well-known measure of market sentiment - surged above 60 intraday, which its highest level since August last year. The index has given back some of these gains, but still traded close to 50 points.
The VIX’s futures curve has turned sharply inverted, signaling intense near-term market stress and a surge in demand for short-term hedging. The spread between the front-month and eight-month contracts has widened to levels not seen since the height of the COVID-19 crisis in 2020, according to Bloomberg data.
Markets are now fully pricing in five Fed rate cuts through 2025 as investors brace for a deeper economic shock. Treasury yields have dropped sharply, with demand rising on expectations of slowing growth.
The megacap stocks like Apple (NASDAQ: AAPL ), Nvidia (NASDAQ: NVDA ) and Amazon (NASDAQ: AMZN ) have continuing to take lower, bearing the brunt of the selling.
Tesla (NASDAQ: TSLA ) was also lower, while Caterpillar (NYSE: CAT ), a big seller of construction equipment around the world, also slumped.
Oil prices fell Monday, but bounced off four-year lows, on hope that the Trump administration’s tariffs would be paused, easing fears of a global recession that would hit demand for crude.
Both contracts declined more than 10% last week, and hit their lowest levels since April 2021 earlier in the session, as China - the world’s biggest crude importer - ramped up tariffs on U.S. goods, with the European Union set to follow suit this week.
Crude sentiment had also been hit by last week’s news that several members of OPEC+, the group which includes the Organization of Petroleum Exporting Countries and allies led by Russia, plan to accelerate production increases.
(Ayushman Ojha, Peter Nurse, Senad Karaahmetovic also contributed to this article.)