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US stocks suffered their biggest single-day decline since April after Donald Trump threatened to impose “huge” tariffs on China, raising fears of an all-out trade war between the world’s two largest economies.
In a post on Truth Social, The president accused Beijing From becoming “very aggressive,” pointing to its recent decision to impose export controls on important minerals.
The S&P 500 lost 2.7 percent on Friday, its worst decline since its 3.5 percent decline on April 10, when markets were reeling from Trump’s initial tariff announcements on “Emancipation Day.”
More than four out of five stocks in Wall Street’s benchmark index were in negative territory in New York. Following Trump’s post, Cboe’s Vix index, a measure of stock market volatility, jumped to its highest level since June.
The Nasdaq Composite Index, which is dominated by technology stocks, lost 3.5 percent. Both indices have recorded a series of record highs in recent weeks.
In response, investors flocked to safe haven assets, sending government bond and gold prices higher.
The yield on the benchmark 10-year Treasury note fell 0.09 percentage point to 4.06 percent following the news. Bond yields move inversely with prices.
The price of gold rose to hover around the level of $4,000 per ounce. Gold first hit a key level on Wednesday morning after a stunning rally in recent months driven by investor concerns about inflation and growing debt piles.
Friday’s stock market sell-off “would have been greater if investors had not assumed that (China and the United States) would continue to reach an agreement,” said Manish Kabra, head of US equity strategy at Société Générale.
Capra added that Trump’s social media post and China’s new export controls were likely “negotiating tactics,” noting that Treasuries were not seeing a sell-off on Friday as occurred in the wake of the president’s “Liberation Day” tariff announcement in April.
Other investors said the sell-off had already piqued the interest of dip buyers.
“We haven’t seen a meaningful uptick in selling yet on this news,” said Joe Anastasio, head of North American equity sales trading at Citi. “If anything, we may have received feedback on what to buy on a pullback.”
Oil prices, which were already low after the start of the Israeli truce with Hamas, continued their declines in the wake of Trump’s latest threats on trade. Brent crude, the global benchmark, fell by 3.8 percent to settle at $62.73 per barrel.
The price of US West Texas Intermediate crude fell to $58.51 a barrel in the late afternoon in New York – its lowest price since May and below the price some shale oil producers need to break even.
Bitcoin fell 4 percent to $116,906 per token.
The fallout between the US and China will create “higher volatility in the short term, but could provide good entry levels,” said Matthias Schipper, head of multi-asset at Allspring Global Investments. “U.S. fundamentals have improved and earnings are strong.”
The European Stoxx 600 index closed down 1.2 percent, and the FTSE 100 index in London lost 0.9 percent.
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