Following President Trump’s announcement of “liberation day” tariffs that were higher than anticipated by markets, U.S. stock futures and the dollar fell sharply on Wednesday.
Shortly after 4 p.m. Eastern time, amid the cheers of the crowd and the sound of trumpets, President Trump strolled up to the lectern in the Rose Garden of the White House.
When Trump announced a 10% universal tariff on all goods entering the U.S., the market’s first response was largely positive, with stock futures rising somewhat and the dollar rising versus competitors like the euro (EURUSD). Prior to the tragedy, some of the more benign media accounts were consistent with that amount.
Investor sentiment abruptly changed when Commerce Secretary Howard Lutnick presented Trump with a massive table listing the higher rates that will be imposed on specific U.S. trading partners. Futures and the dollar both fell precipitously.
The table, which the White House posted on X, states that the United States will impose a 34% tariff on Chinese imports, a 20% tariff on goods coming from the European Union, and a 46% tariff on goods coming from Vietnam.
In an interview with MarketWatch, Steve Sosnick, chief market strategist at Interactive Brokers, stated that “when he said’reciprocal tariffs,’ futures rose about 30 or 40 points initially.”
“Reciprocal doesn’t sound all that horrible.” When individuals saw the actual numbers, which were 10% overall and frequently considerably higher, it became very real to them. And we descended.
When trading was halted for an hour at 5 p.m. Eastern, stock futures were significantly lower. By the time it began to rise again an hour later, futures linked to the Dow Jones Industrial Average (YM00) were down 892 points, or 2.2%, at 41,559. Nasdaq-100 (NQ00) futures were down 4.2% at 18,927. S&P 500 futures (ES00) were down 3.4% at 5,520. At Thursday’s opening, investors were anticipating a thrashing of the stock market.
The U.S. dollar had an initial surge that was swiftly followed by a decline, and currency markets responded similarly to stocks. In recent trading, the ICE U.S. Dollar Index DXY was down 0.5% at 103.74. In relation to the Mexican peso (USDMXN) and Canadian dollar (USDCAD), the dollar was about flat.
“Today is a historic day for international trade. “With reckless confidence, Trump is blowing up the postwar system that made the U.S. and the world more prosperous,” said Nigel Green, CEO of the multinational financial advisory firm deVere Group.
The announcement, according to Wedbush analyst Dan Ives, was “worse than the worst-case scenario.”
“The jaw-dropper was the China reciprocal tariff of 34%, but there are still a lot of nuances to be worked out and investors will be concentrating on the minutiae over the next day. Along with the EU at 20%, Taiwan is the other significant one at 32%, according to Ives.
The statement on Wednesday would raise U.S. tariffs to their highest level since the early 20th century, according to Diane Swonk, chief economist at KPMG U.S.
Others, however, noted that there is still a great deal of uncertainty. Adam Hetts, portfolio manager and global head of multiasset at Janus Henderson Investors, stated that it is still uncertain how long these exorbitant fees will even be in place.
“Eye-watering tariffs on a country-by-country basis scream ‘negotiation tactic,’ which will keep markets on edge for the foreseeable future,” Hetts wrote in a letter. “Fortunately, this means there’s substantial room for lower tariffs from here, albeit with a 10% baseline in place.”
Investors were still awaiting the executive order’s formal text. Trump, however, stated that the taxes will go into force after midnight, coupled with a 25% duty on all auto imports.
