The S&P 500, a significant US stock market index, entered correction territory on Thursday as the turbulence from Donald Trump’s trade conflicts unsettled investors.
The index closed over 10% down from its peak on 19 February as Wall Street nears the conclusion of a second week of turmoil.
The tech-heavy Nasdaq Composite also finished in correction territory last Thursday, while the Dow Jones is down more than 9% from its December high.
On Thursday, after Canadian and EU leaders responded to American tariffs on steel and aluminum imports, the US president threatened to impose a new 200% tariff on European alcohol, countering a 50% EU tariff on American bourbon.
“This will be fantastic for the wine and champagne industries in the US,” Trump stated on Truth Social.
This latest exchange comes amid ongoing disputes between the US and its important trading allies following the implementation of a 25% US tariff on all steel and aluminum imports. Canada and the EU have retaliated with tariffs on American exports totaling over $40 billion.
Canadian and European leaders have pledged not to back down against Trump, even as he threatens further tariffs in retaliation to any opposition. “We will not yield to threats,” declared Laurent Saint-Martin, France’s minister for foreign trade. “Donald Trump is intensifying the trade war he initiated.”
The administration has occasionally shown willingness to make concessions, if only temporarily. For instance, on Tuesday, Trump retracted plans to raise tariffs on Canadian steel and aluminum imports to 50% after Ontario’s premier cancelled plans to impose tariffs on electricity exports to the US. Additionally, last week, he postponed the 25% tariffs he aimed to enact on all Mexican and Canadian imports until April.
Nevertheless, Trump and his administration have downplayed fears regarding the long-term effects of the tariffs on the US economy. US Treasury Secretary Scott Bessent remarked to CNBC on Thursday that the administration’s focus is on the “long-term market benefits and gains for the American public.”
“I’m not worried about a little volatility over a three-week period,” said Bessent.
The US stock market experienced a short-lived reprieve on Wednesday following February’s inflation report, which indicated that price increases were not as severe as anticipated. However, stock prices began to decline again after Canada and the EU instituted tariffs on American goods.
In light of the uncertainties surrounding Trump’s trade strategies, officials from the US Federal Reserve are projected to keep interest rates unchanged during their upcoming meeting next week, which is unlikely to boost sentiment on Wall Street.
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