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The sell-off on Wall Street struck a new low Thursday following the expanding trade war pushed by President Donald Trump, dragging the S&P 500 more than 10 percent below the record set last month.
Such a drop of 10 percent is referred to as a “correction” among professional investors, and the index's 1.4 percent slump on Thursday was the first correction for the index since 2023. The stock market losses followed Trump’s threat to impose massive tariffs on European alcoholic products. The drop continued despite otherwise good news for the American economy.
The Nasdaq composite dropped two percent, while the Dow Jones Industrial Average fell 1.3 percent. The swings have been coming hour to hour, with the Dow going between a small gain and a 689-point drop during trading on Thursday.
The chaos comes following a lack of clarity regarding how much discomfort the president intends to have the economy endure as he fights his trade war. Trump has said that he wants manufacturing jobs back in the U.S. as well as cutting back the government workforce and other significant changes.
On Thursday, Trump threatened to put 200 percent tariffs on European wines unless the European Union removes a tariff on American whiskey, which in itself was a response to a Trump tariff on European steel and aluminum.
American businesses and households have experienced a decrease in confidence because of the lack of clarity regarding what tariffs will remain amid a torrent of on and off announcements from the president. That has created concerns about a decrease in spending that could stunt the energy of the economy.
Among the top fears is that the economy enters “stagflation” — stagnating growth alongside high inflation, with few options available to solve such a situation. For instance, if the Federal Reserve opted to cut interest rates to give the economy a boost, that may increase inflation.
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