Trump's tariff twist triggers market tremors, investors wary
American financial markets are experiencing declines on Thursday. A day after Donald Trump announced the suspension of tariffs on most countries, major U.S. stock indices recorded lower values, and the uncertainty index rose, reflecting investors' concerns.
On Thursday, the Dow Jones Industrial Average fell by 2.42% (981.42 points), reaching 39,627.03 points. The S&P 500 lost 2.99% (163.32 points), ending the session at 5,293.58 points. The Nasdaq Composite saw the largest drop, plunging 3.61% (618.64 points) to close at 16,506.33 points. Meanwhile, the VIX index (referred to as the uncertainty index) increased by 7.56% (2.54 points), rising to 36.16 points.
The mood in the U.S. contrasts with that in Asia and Europe, where stock exchanges recorded gains. Notably, investors' sentiment did not significantly worsen throughout the day. WIG20, DAX, CAC, and IBEX showed solid increases at levels of 4-5%.
Fed concerned about the impact of tariffs on inflation
Jeffrey Schmid, president of the Federal Reserve in Kansas City, expressed concern on Thursday about the potential impact of planned tariffs on inflation. Even though Donald Trump postponed the most aggressive measures for a 90-day negotiation period, the Fed representative emphasized that the current situation might differ from the usual scenario in which tariffs are seen as a one-time price increase rather than a fundamental inflation driver.
On Thursday, Schmid highlighted the experiences of the 1970s and 1980s, warning that cutting rates too soon in reaction to weakening data — before fully controlling inflation — risks embedding inflation into expectations and the price-setting mechanisms.
Schmid, who is a voting member this year on the Federal Open Market Committee (FOMC), which sets interest rates, did not outline a specific path for future rate decisions. However, his comments reflect the stance of other Fed policymakers, who are adopting a wait-and-see approach to observe how tariffs will impact the economy.
Market reactions to Trump's plans
The sell-off in American stock markets shows that investors are taking the new administration's trade policy announcements seriously. Technology companies, in particular, are reacting strongly, as they depend heavily on global supply chains and international trade, which explains the deeper declines in the Nasdaq index compared to other indicators.
The increase in the VIX index, often called the "fear index" on Wall Street, suggests growing uncertainty among market participants regarding the future economic situation. Investors are concerned that the announced tariffs may lead to escalating trade tensions, disruptions in global supply chains, and potentially higher prices for imported goods, which could ultimately affect the inflation level in the United States.
