Stock Market Today: Trump’s China War Threat Triggers Investor Chaos — Why the Market Is Spiraling Out of Control

The US stock market plunged on Friday after President Donald Trump threatened a new wave of tariffs on Chinese goods, reigniting fears of a full-blown trade war. The announcement sent shockwaves through Wall Street, wiping billions off market values and prompting investors to rush into safe-haven assets.

By the end of trading, the S&P 500 had dropped more than 2.5%, while the Dow Jones Industrial Average slid nearly 2%. The Nasdaq Composite was hit hardest, tumbling over 3% as tech shares faced heavy selling.

Analysts said Trump’s remarks were the catalyst behind the sudden sell-off, raising fresh concerns about global trade and market stability.

Trump’s Tariff Comments Spark Renewed Trade War Fears

Trump’s comments, posted on Truth Social, threatened to impose 100% tariffs on Chinese goods in response to Beijing’s restrictions on rare earth exports, which are crucial for semiconductors and defence technologies.

The move, analysts say, marks a sharp escalation in trade tensions between the world’s two largest economies.

The president accused China of ‘economic manipulation’ and vowed to ‘bring jobs and manufacturing back to America.’

As reported by CNN Politics, his threat also zeroes in on rare earth exports from China — a critical lever in the semiconductor and defence sectors — which helped spark investor concern over retaliation. Markets reacted swiftly, with investors fearing disruption to global supply chains.

Economists compared the reaction to the 2018–2019 trade war, which saw global markets tumble amid tit-for-tat tariffs.

A senior analyst at JPMorgan noted that the timing was particularly volatile, as traders were already cautious ahead of earnings season.

Markets Slide as Investors Flee to Safety

The market fallout was immediate. The SPDR S&P 500 ETF Trust (SPY) dropped more than 2.7% intraday, while the SPDR Dow Jones Industrial Average ETF (DIA) fell nearly 2%.

Shares of Tesla, Oracle, and Taiwan Semiconductor were among the biggest losers, reflecting investor anxiety over companies heavily reliant on Chinese markets and supply chains.

As equities tumbled, investors shifted their focus to traditional safe-haven assets. The 10-year US Treasury yield fell to around 4.05%, reflecting strong demand for government bonds. Gold prices also edged higher, benefiting from the flight to safety.

Market analysts described the reaction as a textbook risk-off shift, noting that traders were moving swiftly to reduce exposure to volatile sectors while gauging the potential impact of Trump’s tariff threat on global trade and supply chains.

Why Markets Are Spiralling Out of Control

Beyond Trump’s announcement, analysts say the sell-off exposes deeper vulnerabilities in the current market rally. Valuations across the technology and AI sectors remain elevated, with the Bank of England recently warning that a sudden correction in AI-linked shares could have global repercussions.

The ongoing US government shutdown has also left investors without access to key economic data, such as inflation and jobs figures, making it harder to gauge the strength of the economy. Without those indicators, traders are reacting more sharply to political headlines and speculation.

Analysts noted that market volatility has been amplified by the current information gap, with limited economic data available due to the ongoing government shutdown. This has left traders more reactive to geopolitical developments and policy statements, contributing to sharper swings in sentiment across global markets.

What Investors Are Watching Next

Attention now turns to Beijing’s response and any signals from Washington that might ease tensions. Investors are also closely monitoring the upcoming earnings season, hoping corporate results might steady the market after one of its most volatile weeks in months.

Meanwhile, focus remains on the Federal Reserve, as traders weigh the likelihood of interest rate cuts later this year. For now, caution dominates trading floors as fears of a renewed US-China trade war and an overheated stock market keep investors on edge.