A specialist trader works at his post on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., April 3, 2025.Brendan McDermid/Reuters
Stocks across the world plunged Thursday, with the major U.S. and Canadian indexes suffering their largest one-day percentage losses since the early days of the pandemic in 2020, as U.S. President Donald Trump’s sweeping tariffs ignited fears of an all-out trade war and a global economic recession.
A combined US$2.4 trillion in stock market value was wiped off of S&P 500 companies alone, as investors began to price in a potentially toxic mix of weakening economic growth and the higher inflation that could be triggered by the tariffs. Some of the biggest declines were seen in smaller capitalization U.S. stocks, which are particularly vulnerable to economic conditions. The Russell 2000 index of small caps fell into a bear market - a move of more than 20% from its recent highs.
Investors started fleeing risky assets almost immediately after Trump announced after markets closed Wednesday that he was slapping a 10% tariff on most U.S. imports and much higher levies on dozens of other countries. U.S. treasury yields moved sharply lower, reflecting both the flight to the safer asset class of bonds as well as growing concerns a global recession may be unavoidable. Markets priced in higher odds the Federal Reserve will cut interest rates in coming months, but it came with unease given that such a monetary policy move would likely only exacerbate inflationary pressures.
The tone in markets marked a stark shift from just a few months ago when the promise of business-friendly policies under the Trump administration propelled U.S. stocks to record highs.
“The tariffs represent a sea change for global trade and the global economy. It was far worse than almost anyone thought, and the odds of a U.S. and global recession rose dramatically,” said Ryan Lewenza, senior financial adviser and senior portfolio manager, private client group with Turner Investments at Raymond James Ltd. in Toronto. “For the stock market, the lower economic growth and higher prices will weigh on margins and earnings.”
For months, many investors believed Trump would soften his stance on tariffs should markets start to sell off and the economy weaken, the so-called Trump put. Now, that assumption is being challenged.
“The Trump administration has identified the U.S. commercial trade deficit and the budget deficit as being unsustainable. Trump appears willing to absorb some pain, including market weakness and possibly a recession, early in his administration to improve the lives of his constituents,” said François Bourdon, managing partner at Nordis Capital in Montreal. “We believe these tariffs highlight a transformational shift and that market volatility is here to stay.”
Wild swings are expected in the coming days: the CBOE Volatility index, known as Wall Street’s fear gauge, closed above 30 points for the first time since August.
As investors sold positions to reflect the new economic reality, they grew concerned about how other countries would react to Trump’s proclamations from the White House.
China vowed retaliation, as did the European Union, which faces a 20% duty. South Korea, Mexico, India and several other trading partners said they would hold off for now as they seek concessions before the targeted tariffs take effect on April 9. Canadian Prime Minister Mark Carney announced a limited set of counter measures against U.S. tariffs while calling Trump’s protectionist moves a tragedy for global trade. Trump didn’t announce any new tariffs against Canada on Wednesday, but it was unclear how long that would last.
The S&P 500 lost 274.45 points, or 4.84%, at 5,396.52 points, while the Nasdaq Composite dropped 1,050.44 points, or 5.97%, to 16,550.61. The Dow Jones Industrial Average fell 1,679.39 points, or 3.98%, to 40,545.93.
The S&P/TSX composite index ended down 971.41 points, or 3.8%, at 24,335.77, its lowest closing level since March 13 and its biggest decline since June 2020.
“Today we might be seeing a bit of the first day’s shock,” said Michael Sprung, president at Sprung Investment Management. “I’m not sure that we’re going to see too much of a bounce-back any time soon until we get more clarity on just what some of the countermeasures that other countries might do.”
High-flying technology stocks, which had helped push benchmarks to record highs in recent years, suffered heavily on Thursday.
Apple sank 9.2%, its worst one-day performance in five years, reeling from an aggregate 54% tariff on China, the base for much of the iPhone maker’s manufacturing. Nvidia slumped 7.8%, and Amazon.com dropped 9%.
The technology sector in Toronto tumbled 9.5%, with e-commerce company Shopify Inc down nearly 20%.
The energy sector in Toronto lost 7.1% as the price of oil settled 6.6% lower at US$66.95 a barrel. OPEC+ agreed to a surprise increase in output which compounded already heavy losses following the tariff announcement.
The price of gold also fell and copper posted steep declines. The TSX materials group was down 2.7%. Heavily weighted financials in Toronto lost 3.1% and industrials ended 3% lower.
Consumer staples was the only one of ten major sectors to notch gains on the TSX, rising 0.9%, as supermarket chain Loblaw Companies Ltd moved to a fresh record high. Consumer staples, traditionally considered a defensive play, was also a rare gainer in the U.S. market.
Retailers were hit hard on both sides of the border, with Nike and Ralph Lauren falling 14.4% and 16.3%, respectively, on a raft of new tariffs on major production hubs including Vietnam, Indonesia and China. Aritzia in Toronto lost 20.4%.
U.S. big banks, which are sensitive to economic risks, fell. Citigroup, Bank of America, and JPMorgan Chase & Co all dropped between 7% and 12.1%.
The yield on the 10-year U.S. Treasury fell to 4.04% from 4.20% late Wednesday and from roughly 4.80% in January. But yields on Canadian bonds held steady, with money market traders actually cutting their bets for a Bank of Canada rate cut later this month to about 32% odds. However, money markets are still pricing in at least two more rate cuts by the BoC by the end of this year.
The U.S. dollar posted sharp declines against major currencies as investors moved to price in four interest rate cuts this year from the Federal Reserve, up from three before the tariff announcement. That, in turn, aided the loonie, which rose about a cent to the 71 cents US level, a nearly four-month high.
Thursday’s market bloodbath heightens the significance of Friday’s payrolls data and Fed Chair Jerome Powell’s speech the same day, which could offer crucial insights into the U.S. economy’s health and the future path of interest rates.
Trump offered an upbeat reaction after he was asked about the market’s drop as he left the White House to fly to his Florida golf club on Thursday.
“I think it’s going very well,” he said. “We have an operation, like when a patient gets operated on and it’s a big thing. I said this would exactly be the way it is.”
With reports from Reuters, The Associated Press and Brenda Bouw