U.S. stock markets saw significant declines on Friday after President Donald Trump announced he is considering a substantial increase in tariffs on Chinese imports. The announcement, made via Trump’s social media platform, came in response to China’s restrictions on the export of rare earth materials that are vital for manufacturing various goods, including electronics and jet engines.
“We have been contacted by other Countries who are extremely angry at this great Trade hostility, which came out of nowhere,” Trump wrote on Truth Social. He also stated: “now there seems to be no reason” to meet with China’s leader, Xi Jinping, despite previously agreeing to do so during an upcoming trip to South Korea.
The S&P 500 index fell 2.7%, marking its worst day since April. The Dow Jones Industrial Average dropped 878 points, or 1.9%, and the Nasdaq composite lost 3.6%. Nearly six out of every seven stocks in the S&P 500 declined as investors responded to the increased tensions between the U.S. and China.
Major technology companies such as Nvidia and Apple were among those affected by the selloff, along with smaller firms navigating uncertainty around tariffs and trade policy changes.
Analysts have raised concerns that stock prices may have become overvalued following a sustained rally in recent months; since April, the S&P 500 had climbed nearly 35%. Critics argue that market valuations have risen faster than corporate profits, particularly within sectors tied to artificial intelligence—a trend some compare to the dot-com bubble of 2000.
Levi Strauss shares dropped by 12.6% despite posting quarterly profits above analyst expectations and issuing annual forecasts within Wall Street estimates. The company’s stock had previously surged nearly 42% for the year before Friday’s decline.
Oil prices also experienced notable drops as a ceasefire between Israel and Hamas took effect in Gaza, reducing fears about potential supply disruptions from ongoing conflict in the region. Benchmark U.S. crude fell by 4.2% to $58.90 per barrel while Brent crude decreased by 3.8% to $62.73 per barrel.
Bond yields moved lower as well; the yield on the benchmark 10-year Treasury note slipped from 4.14% late Thursday to 4.05%. This followed a report from the University of Michigan indicating that consumer sentiment remains subdued amid concerns about persistent inflation and job market weakness.
“Pocketbook issues like high prices and weakening job prospects remain at the forefront of consumers’ minds,” said Joanne Hsu, director of Surveys of Consumers at the University of Michigan. “At this time, consumers do not expect meaningful improvement in these factors.”
A preliminary survey showed consumers’ inflation expectations for next year eased slightly—from 4.7% last month down to 4.6%.
The Federal Reserve recently cut its main interest rate for the first time this year due to a slowing labor market and has signaled further possible reductions if economic conditions warrant it—though officials remain cautious should inflationary pressures persist.
Stock indexes abroad mirrored U.S declines: Hong Kong’s Hang Seng index fell by 1.7%, France’s CAC 40 dropped by 1.5%, while South Korea’s Kospi rose sharply after reopening post-holiday closures.
