Introduction
US tech giants and major retailers faced significant losses as fears of rising costs sparked a global market downturn following new tariffs announced by President Donald Trump.Context
The tariffs threaten to disrupt the world trade order and create instability for businesses, a stark contrast to earlier optimism about pro-business policies under the Trump administration that had driven US stocks to record highs. Trump announced plans to impose tariffs on all imports to the United States and increase duties on several other countries, raising US tariffs to the highest levels seen in over a century, according to Fitch Ratings.Developments
Analysts have cautioned that steep tariffs on imports from Asian manufacturing hubs, combined with potential retaliatory actions, could significantly impact global supply chains and reduce corporate profit margins. Deutsche Bank's Senior US Economist Brett Ryan noted that these measures could deduct 1 to 1.5 percentage points from US economic growth this year, heightening recession risks.The Dow Jones Industrial Average dropped 3.60%, while the S&P 500 slid 4.24%. Apple’s stock fell 8.6%, primarily due to its reliance on Chinese manufacturing, severely affected by the tariffs. Rosenblatt Securities projected that Apple could incur $39.5 billion in tariff costs, which could lead to a nearly 32% decrease in operating profit.
PC manufacturers such as Dell and HP are also bracing for cost increases of 10%-25%, translating to an additional $200 to $500 per unit. Such pressures could further impact PC demand, which has been shaky in recent years, with Dell and HP shares down 15% and 12%, respectively. The tariffs threaten to make AI servers more expensive as well, potentially adding millions in costs and jeopardizing AI development plans at major tech firms. Microsoft shares declined 2.6%, while Alphabet's dropped 4%.
Although semiconductors were not explicitly included in the tariff list, they are expected to be affected by baseline duties, as reflected by a 7.2% decline in the iShares Semiconductor ETF. Major US retailers like Walmart, Amazon, and Target also saw declines of 4% to 11%, as they rely heavily on Asian suppliers and may need to raise prices.
China faced an aggregate tariff rate of 54%, with Vietnam at 46%, Cambodia at 49%, and Indonesia at 32%. Sportswear retailers, including Lululemon and Nike, experienced declines of 13%, reflecting the impact on their sourcing partners.
The S&P 500 retail index fell 6.8%, reaching its lowest level since September 2024. Major Wall Street banks such as JPMorgan Chase, Citigroup, and Bank of America faced losses between 7% and 11%, as concerns about economic risks cling to the investment banking sector. Regional banks were also affected, with the S&P 500 banks index shedding 8.4%.
Automakers, including Ford and General Motors, saw shares drop 4.2% and 3.1%, respectively, as new auto tariffs were set to take effect. Electric vehicle manufacturers Rivian and Lucid fell 5.3% and 2.3%, while Tesla was down 7%. Estimates suggest tariffs could raise costs by $2,500 to $5,000 for the lowest-cost American cars and up to $20,000 for certain imported models, impacting consumers by $30 billion in the first year.
Some pharmaceutical companies, such as Pfizer and Johnson & Johnson, received temporary exemptions from tariffs, helping their stocks remain resilient amidst the turmoil. However, analysts warned that the pharmaceutical sector is not safe yet, as potential changes to the industry loom under Trump's administration.
Shares of medical device makers like Dexcom and GE Healthcare fell nearly 9% due to supply chain risks stemming from tariffs on imported materials. Meanwhile, energy stocks and crude prices also suffered, despite oil, gas, and refined products being exempt from tariffs. Brent crude and US WTI prices fell more than 7%, exerting downward pressure on oil and related sectors.
Investors appear increasingly concerned that aggressive tariff strategies could stifle global demand growth, particularly as OPEC’s surprise decision to boost output has further softened the market.