Dow sheds 1,000 points in stock market rout on China trade war concerns

U.S. stocks ended sharply lower Thursday with the blue-chip Dow off more than 1,000 points as investors worried about a trade war with China.

The U.S. tariff rate on Chinese imports now effectively totals 145%, a White House official said.

Trump’s latest executive order hikes tariffs on Chinese goods to 125% from 84%, but that is on top of a 20% fentanyl-related tariff that Trump previously imposed on China. The earlier 20% levy means the total tariff is 145%.

"The increase in U.S. tariffs on China’s imports will deliver meaningful upward pressure to costs unless supply chains can be diverted to other economies, so inflation risks remain elevated," Seema Shah, chief global strategist at Principal Asset Management.

The Dow fell 2.5%, or 1,014.79 points, to 39,593.66; the broad S&P 500 dropped 3.46%, or 188.85 points, to 5,268.05; and the tech-heavy Nasdaq slid 4.31%, or 737.66 points, to 16,387.31.

The benchmark 10-year Treasury yield rose to 4.4%. Treasury yields drop when bond prices rise.

Gold prices jumped more than 3.5%, touching a new record high during the day as investors fled to safer assets. Gold had its best day since April 9, 2020.

Investors would normally have cheered slower-than-expected inflation data reported Thursday morning, but instead, they gave back gains from Wednesday’s historic surge on President Donald Trump's 90-day pause on some of his most aggressive tariffs.

"The latest U.S. inflation figures can already be considered as stale on release after the exhausting back and forth of tariff announcements," said CJ Cowan, portfolio manager at Quilter Investors.

Annual March inflation eased to 2.4% from a year earlier, down from February's 2.8% rise, according to the Labor Department’s consumer price index, a measure of average changes in goods and services costs. That’s the lowest annual increase since September and below economists' average forecast for 2.6% but still leaves inflation above the Federal Reserve’s 2% goal.

Annual core inflation, which excludes the volatile food and energy categories, eased to 2.8%, the lowest since March 2021 and below foreacasts for 3% and February's 3.1%.

Kansas City Federal Reserve President Jeffrey Schmid said Thursday policymakers will probably have to stay abreast of inflation threats rather than slower growth as they contemplate future moves in interest rates. Most economists expect Trump's tariffs to raise prices.

Trump said on Wednesday he's keeping a 10% tariff across countries, except China. He raised China's tariff because the Asian nation retaliated by slapping its own tariff on U.S. goods.

Trump declined to rule out extending the 90-day tariff pause, and White House economic advisor Kevin Hassett said there are trade deal offers from 15 countries. The European Union said it would follow Trump's lead and delay its retaliatory tariffs for 90 days to engage in negotiations.

However, none of that mattered to investors focused on potential pitfalls of a major trade war with China.

“Even with the tariff delays announced yesterday, this is likely the calm before (an inflation) storm, given China is our third largest trading partner and now everything from Barbie dolls to nuclear reactors made in China will come with a...price hike," said Robert Frick, corporate economist with Navy Federal Credit Union.

"The current situation is not only chaotic, it’s crazy," said ING Economist Carsten Brzeski. "Don’t forget that we have been here before with announcements and then we get some pauses, only for the originally announced tariff to be reintroduced again. As such, caution remains warranted - and remember President Trump does need revenue to fund his promised tax cuts. It would be a surprise if...(the) announcement was really the return of ‘common sense’."

On Wednesday, stocks surged, pushing up the S&P 500 more than 9% for its third-largest gain in a single day since World War II. The Dow posted its biggest percentage advance since March 2020, while the Nasdaq scored its biggest one-day gain since January 2001 and second-best day on record.

About 30 billion shares changed hands, which was the highest in at least 18 years.

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Corporate news

Starting Friday, investors will get another view on tariffs through the lens of corporate America when earnings season begins. JP Morgan, Wells Fargo and Morgan Stanley will report quarterly results that day, and investors will be eager to see if recent tariff-related volatility has already affected consumers and businesses and what their outlook is.

In the meantime, Thursday's company news includes:

• Costco posted March net sales of $25.51 billion, up 8.6% from a year ago. The wholesaler’s shares gave up early gains to end down nearly 1%.
• Constellation Brands issued a full-year outlook that missed analysts' expectations despite better-than-expected results in the last three months of the year. Shares closed fractionally higher.
• U.S. Steel should remain an American company, Trump said. U.S. Steel and Japan’s Nippon Steel are still trying to complete a merger. Shares of the U.S. steelmaker shed almost 9.5%.
• CarMax's quarterly results disappointed analysts. The used-car seller also noted changes to tariffs could impact its future results. Shares tumbled 17%
• Janover shares soared 64% after the software firm bought its first Solana token.

Cryptocurrency

Bitcoin lost ground in line with stocks, deepening losses as the day progressed. The digital currency was last down 3.55% at $79,642.22, falling below the key psychological $80,000 level.

This story was updated with new information.

Medora Lee is a money, markets, and personal finance reporter at Paste BN. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday.