Tariff Chaos Drives Historic Market Swings, Gold Soars
Wall Street experienced extreme whiplash as markets surrendered a significant portion of Wednesday’s historic gains, with investors fleeing risk assets after learning China would face a punishing 145% cumulative tariff rate despite President Trump’s broader tariff pause. The Dow Jones Industrial Average plummeted 1,014 points on Thursday, while the tech-heavy Nasdaq Composite tumbled 4.31% as the reality of continued trade tensions sank in.
“Uncertainty is a big issue because the 145% rate could be a different number tomorrow,” explained Melissa Brown, SimCorp managing director of applied research. “It’s very hard to call a bottom or a top because things have changed so much in the narrative and investor perceptions,” she told CNBC.
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Gold and Cryptocurrencies Diverge
As equities struggled, gold futures surged 3.2% to settle at $3,177.50 per ounce, marking the precious metal’s best day since April 2020. The climb pushed gold’s weekly gain to 4.7%, putting it on track for its strongest week since November 2024 as investors sought traditional safe havens amid the policy uncertainty.
Cryptocurrencies showed less resilience than in previous sessions, with Bitcoin falling nearly 4% to $79,158.62. Despite this pullback, analysts noted Bitcoin’s relative stability compared to equities. “While it’s no secret that BTC is still closely tied to the daily fluctuations of the market and overall sentiment, its ability to hang in during this recent bloodbath has been impressive,” said Read Harvey, an analyst at Wolfe Research.
LET HIM COOK! 😤 pic.twitter.com/3sEU5UtU6X
— The White House (@WhiteHouse) April 9, 2025
White House Signals Flexibility
The massive swings in market sentiment followed clarification that China would face not only the new 125% reciprocal tariff but also an additional 20% levy previously imposed over fentanyl concerns. This revelation accelerated Thursday’s selloff, especially among technology companies with significant Chinese manufacturing exposure.
Apple shares tumbled 4.2% amid analyst predictions that tariffs could increase iPhone prices by up to $350, while Tesla dropped 7.3% despite CEO Elon Musk’s close relationship with the administration. Nvidia, the AI chip giant, shed nearly 6% as investors recalibrated supply chain disruption risks.
President Trump attempted to ease market jitters during a Cabinet meeting, suggesting the 90-day pause announced Wednesday could potentially be extended beyond July. “We’ll have to see what happens at that time,” he remarked, maintaining policy flexibility even as administration officials denied that market reactions influenced their decision-making.
European Union Mirrors U.S. Move
The European Union announced Thursday it would halt retaliatory tariffs on U.S. products for 90 days, mirroring Trump’s approach and suggesting potential progress in trade negotiations. This coordinated response offered a rare bright spot amid widespread market volatility.
The diplomatic developments came as Senator Adam Schiff called for a congressional investigation into whether the administration engaged in market manipulation with its sudden policy shift. “I’m going to do my best to find out,” Schiff told TIME, referencing Trump’s Truth Social post declaring “THIS IS A GREAT TIME TO BUY!!!” shortly after markets opened Wednesday.
Federal Budget Impact Emerges
As markets digested the policy implications, a Treasury report revealed the U.S. budget deficit has swelled past $1.3 trillion for the first half of fiscal 2025, with interest payments becoming an increasingly burdensome expense. Net interest on the debt totaled $93 billion in March alone, with only Social Security representing a higher expenditure.
Early returns from the tariff policy showed customs duties in the initial implementation phase totaled $8.2 billion, bringing the fiscal-year total to $43.6 billion – nearly $6 billion higher than the prior year. However, these revenue gains must be weighed against broader economic impacts, with Capital Economics projecting U.S. inflation will peak at 4% and GDP growth will be limited to 1.0-1.5% over the next year.
Kansas City Federal Reserve President Jeffrey Schmid signaled the central bank may need to prioritize inflation concerns over growth worries when considering interest rate moves. “With renewed price pressures likely, I am not willing to take any chances when it comes to maintaining the Fed’s credibility on inflation,” he stated in prepared remarks.
The extreme market volatility has left investors bracing for continued turbulence. “While we can certainly see some backing and filling, given the news we don’t want to be too cautious until this rally shows that it’s exhausted itself,” BTIG analysts wrote. “It seems appropriate to be neutral here anticipating a choppy trading range,” a sentiment clearly reflected in both Thursday’s price action and the CBOE Volatility Index (VIX), which surged back above 50.
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