Wall Street’s main indexes were mixed at the open on Wednesday after China announced more levies on U.S. goods, retaliating to President Donald Trump’s reciprocal tariffs that took effect earlier in the day.
The S&P 500 was bobbing between small gains and losses in early trading Wednesday. The Dow Jones Industrial Average was down 170 points, or 0.5 per cent, and the Nasdaq composite was 0.5 per cent higher.
The world’s second-largest economy would impose additional tariffs of 84 per cent on all U.S. goods as of Thursday, up from the 34 per cent previously announced, China’s Finance Ministry said.
Beijing said it was also launching an additional suit against the U.S. at the World Trade Organization and placed further restrictions on American companies’ trade with Chinese companies.
“If the U.S. insists on further escalating its economic and trade restrictions, China has the firm will and abundant means to take necessary countermeasures and fight to the end,” the Ministry of Commerce wrote in a statement introducing its white paper on trade with the U.S.
In contrast to the rest of the world, Chinese markets saw small gains after the announcement of new tariffs on the U.S. Hong Kong’s Hang Seng rose 0.7 per cent, while the Shanghai Composite index closed 1.3 per cent higher.
As hopes of concessions faded and tariffs on dozens of countries began, investors ramped up their exit from stocks, industrial commodities and even government bonds.
WATCH: Trump’s tariffs and the backlash to them set in globally
Prices for U.S. crude oil skidded more than five per cent to $56.38 per barrel, their lowest level since February 2021 when the U.S. and global economies were still emerging from the COVID-19 pandemic. Rapidly falling oil prices often signal investor pessimism about economic growth and can signal a recession ahead.
The CBOE Volatility index — seen as Wall Street’s “fear gauge” — was hovering near its highest level since August.
“I do think that this is a game of ‘chicken’ in the sense that both sides are upping the barriers,” said Peter Andersen, founder of Andersen Capital Management.
“What we’re seeing now is a complete correlation between any news related to tariffs and the stock market reactions.”
Prospects of tariff deals had lifted U.S. equities on Tuesday, sparking a rally early in the session, though gains were not sustained and all three major indexes closed down.
Since Trump unveiled his tariffs last Wednesday, the S&P 500 has shed more than $5.83 trillion US in market value and will confirm a bear market if it closes more than 20 per cent below its record high. As of last close, it was down 19 per cent from its peak.
The seemingly wholesale push out of treasuries and the dollar, effectively the backbone of the global financial system, could be symptomatic of a broader loss in investor desire to hold U.S. assets in general and “the end of an era,” according to Deutsche Bank head of foreign exchange research George Saravelos.
“We are witnessing a simultaneous collapse in the price of all U.S. assets including equities, the dollar versus alternative reserve FX and the bond market. We are entering uncharted territory in the global financial system,” he said.
Markets in Europe also extended their losses, with Germany’s DAX sliding 4.1 per cent. In Paris, the CAC 40 declined 3.9 per cent and Britain’s FTSE 100 gave up 3.8 per cent.
Elsewhere, markets remained gloomy. Japan’s Nikkei 225 closed 3.9 per cent lower, at 31,714.03 and Prime Minister Shigeru Ishiba convened a meeting of top financial ministers to reiterate his call for them to do what they can to mitigate the damage from tariffs to Japanese automakers and other manufacturers.
Taiwan led the losses in Asia, as its Taiex plunged 5.8 per cent.
