Trump Trade War Impact Sends Shockwaves Through Wall Street
The Trump trade war impact is once again rattling global markets. On Friday, US stocks fell sharply after Donald Trump threatened to impose massive new tariffs on Chinese imports, sparking fears of another US-China trade war.
The Dow Jones Industrial Average plunged 879 points (1.9%), while the S&P 500 dropped 2.71%, and the Nasdaq Composite slid 3.56%. The S&P 500 alone lost $1.56 trillion in market value in a single day, according to FactSet data.
Why Did Markets Fall?
Trump accused China of restricting exports of rare earth minerals, which are crucial for producing advanced electronics and AI chips. He said the US “should not be held captive” by China and threatened a massive tariff hike on imports.
This statement, posted on Truth Social, shocked investors who had grown comfortable with a calm, rising market. The announcement led to a 32% surge in the CBOE Volatility Index (VIX), often called Wall Street’s “fear gauge.”
“We’d become used to calm markets with upward bias. Seeing stocks in a quick freefall was shocking,” said Steve Sosnick, Chief Strategist at Interactive Brokers.
Trump Trade War Impact on Tech and AI Stocks
The Trump trade war impact hit technology stocks the hardest. AI and semiconductor companies that depend heavily on global supply chains — especially those involving China — suffered steep declines.
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Nvidia (NVDA) fell 4.95%
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Advanced Micro Devices (AMD) dropped 7.78%
Analysts explained that since tech valuations are already high, they are more vulnerable to sudden shocks. “When you have a surprise like today, tech stocks take the biggest hit,” said José Torres, senior economist at Interactive Brokers.
Winners Amid the Chaos
While most of Wall Street suffered, a few sectors gained. US-based rare earth mining companies such as USA Rare Earth (USAR) and MP Materials (MP) jumped 4.96% and 8.37%, respectively.
This reflects investors betting that if trade tensions escalate, the US will increase domestic production of rare earths to reduce reliance on China.
Safe Havens Rise as Investors Flee Stocks
As fear spread, investors rushed into safe assets like US Treasury bonds, gold, and silver. Yields on 10-year and 30-year Treasuries fell, while gold prices climbed 1.5% and silver gained 1.2%.
Meanwhile, oil prices dropped sharply — US crude down 4.2% and Brent crude down 3.8% — partly due to easing geopolitical tensions in the Middle East and new worries about slowing economic growth.
Market Mood Turns to Fear
CNN’s Fear and Greed Index shifted from neutral to fear for the first time since May. Analysts warned that the Trump trade war impact could lead to a deeper market correction if tensions with China continue.
“Greed has far outpaced fear all summer, but that balance could flip fast,” said Michael O’Rourke, Chief Market Strategist at JonesTrading.
The Bigger Picture: What’s Next for Investors
The latest developments suggest that the Trump trade war impact could once again shape the global economy. If tariffs are reinstated, both US and Chinese industries could face higher costs, lower exports, and reduced growth.
For investors, diversification into safe assets and sectors less exposed to global trade may be the smart move until clarity returns.