U.S. stocks plunged sharply on Thursday, wiping out much of the momentum from a brief rally the previous day sparked by President Donald Trump’s announcement that he would delay a significant portion of planned tariffs on dozens of countries. Despite the temporary relief, investor sentiment turned decidedly bearish as markets reevaluated the broader landscape of the U.S.-China trade conflict and its potential long-term implications for the global economy.
The S&P 500 shed 4.0%, with all 11 sectors in the red by afternoon trading. The Nasdaq Composite fell even harder, losing 4.8% as tech stocks—often the most sensitive to global supply chain disruptions—led the retreat. Meanwhile, the Dow Jones Industrial Average slid 2.8%, with major industrials and exporters under pressure.
Relief Rally Reverses
On Wednesday, President Trump announced a delay in implementing new tariffs targeting a wide range of imports from countries including European allies and several emerging markets. The move was interpreted by investors as a sign that the White House might be reconsidering its aggressive stance on global trade amid concerns over domestic economic impact and international backlash.
Markets surged on the news, with the S&P 500 rising over 3% and the Nasdaq jumping nearly 4.5% during the previous session. However, Thursday’s steep reversal signaled that investors viewed the delay as a temporary reprieve rather than a true de-escalation of trade tensions.
Focus Shifts Back to China
The optimism was short-lived as attention quickly shifted back to the unresolved and intensifying trade war between the U.S. and China. Despite the tariff postponements affecting other nations, the White House reaffirmed its commitment to imposing even steeper levies on Chinese goods—a move seen as a direct escalation in the two-year-long economic standoff between the world’s largest economies.
Reports emerged that upcoming tariffs could affect an additional $300 billion in Chinese imports, triggering fears of higher consumer prices, disrupted supply chains, and slowing global growth. Economists have warned that these new levies could hit U.S. companies hard, particularly those reliant on Chinese components, such as electronics manufacturers and auto makers.
Tech Sector Hit Hardest
Tech stocks bore the brunt of Thursday’s selloff. Shares of Apple Inc. (AAPL), which sources a large portion of its hardware components from China, fell over 6%, while Nvidia (NVDA) and Advanced Micro Devices (AMD) dropped more than 5% each. Software giants like Microsoft (MSFT) and Alphabet (GOOGL) also declined significantly, dragged lower by broader market sentiment and fears of a slowdown in business investment.
“The market’s knee-jerk reaction to the tariff delay was perhaps overly optimistic,” said Elaine Morris, chief strategist at GlobalView Investments. “The fundamental issues in the U.S.-China relationship remain unresolved, and today’s selloff reflects a sober reassessment of the risks that still lie ahead.”
Broader Market Anxiety
Beyond tech, cyclical sectors like industrials, materials, and energy also saw heavy losses. Shares of Caterpillar Inc. (CAT) and 3M (MMM) fell 3.5% and 4.1% respectively, as investors anticipated weaker global demand and continued supply disruptions.
The CBOE Volatility Index (VIX)—commonly referred to as Wall Street’s “fear gauge”—jumped 25%, signaling heightened investor anxiety. Bond yields also dropped, with the 10-year Treasury yield falling below 3.4%, as traders moved funds into safe-haven assets.
Looking Ahead
While the immediate impact of Trump’s tariff delay provided momentary relief, markets appear to be grappling with a deeper, more structural concern: the long-term trajectory of U.S. trade policy and its consequences for global growth. With no clear resolution in sight for the U.S.-China conflict, analysts warn that volatility may persist in the coming weeks.
“Investors are realizing that trade policy is now a persistent and unpredictable risk factor,” said Janet Lee, senior economist at Brookstone Capital. “Even when temporary measures are taken, the uncertainty is enough to freeze corporate investment decisions and pressure equity markets.”
As earnings season approaches and economic data continue to show signs of deceleration, all eyes will remain on Washington and Beijing. Whether cooler heads prevail—or if the rhetoric and retaliations continue to escalate—could determine whether Thursday’s selloff is a blip or the beginning of a broader correction.
