Markets Rattle As Trump’s Trade Tactics Fuel Investor Anxiety

 

U.S. stocks fell sharply Wednesday as investor caution deepened over President Donald Trump’s escalating trade war with China and its unpredictable economic consequences.

All three major indexes closed lower following remarks from Federal Reserve Chair Jerome Powell, who stated that the economic impact of Trump’s policies “remains highly uncertain.”

• The Dow plunged 700 points, a drop of 1.7%.

• The S&P 500 lost 2.5%.

• The Nasdaq Composite tumbled 3.5%, weighed down by losses in tech.

Powell, speaking at a Chicago event, warned: “The level of the tariff increases announced so far is significantly larger than anticipated. The same is likely to be true of the economic effects, which will include higher inflation and slower growth.”

His comments reinforced growing concerns about the ongoing volatility surrounding U.S. trade policy. Wall Street has been on edge as the Trump administration’s shifting stance on tariffs and trade talks continues to cloud economic forecasts.

One of the most significant developments this week came from chipmaker Nvidia, which saw its stock slump more than 8% after announcing a projected $5.5 billion loss. The blow comes in the wake of new U.S. government restrictions on the export of its advanced AI chips to China—another flashpoint in the intensifying U.S.-China tech rivalry.

That rivalry has gained momentum since the rise of Chinese AI contenders like DeepSeek, which shook Silicon Valley with a budget-friendly AI model rivalling ChatGPT. The race for AI dominance is now shaping up to be a cornerstone in the broader geopolitical competition between the two powers.

Despite expectations that trade negotiations will eventually yield progress, many analysts see continued short-term volatility ahead. “Brinkmanship between the U.S. and China looks set to continue,” said Solita Marcelli, CIO for the Americas at UBS Global Wealth Management, in a Wednesday market note.

Earlier this week, the Trump administration announced investigations into imports of pharmaceuticals and semiconductors—early steps toward potential new tariffs. Trump also revealed plans to announce a new tariff rate on imported chips within days, with some flexibility for specific companies.

Markets saw a modest uptick Monday after the administration granted temporary exemptions for some Chinese electronics and hinted at similar relief for automakers. However, these brief reprieves have done little to stabilize markets, which continue to drift below their early-April levels—before the president’s latest tariff threats.

“Given the frequent shifts in the administration’s stance, the only certainty is extended uncertainty,” analysts at Citi remarked in a recent note, referencing the sudden exemptions announced late last week.

The broader global outlook is also dimming. A new report from the World Trade Organization downgraded its forecast for global GDP growth to 2.2%—0.6 percentage points lower than it would be without additional tariffs.

Currency markets reflected the turmoil as well. The U.S. dollar index—tracking the greenback against six major currencies—fell Wednesday, continuing its worst weekly streak since 2022.

Meanwhile, Treasury yields dipped as nervous investors fled to safer assets. The yield on the 10-year note hovered around 4.3%, down from the previous day.

Investor sentiment remained deeply pessimistic. One widely-followed market gauge showed conditions firmly in “extreme fear,” a sentiment that has gripped markets since late March.

As the White House doubles down on its trade offensive, and the Fed signals caution without a clear path forward, one thing is clear: markets are bracing for a prolonged period of turbulence.