Stocks tumbled on Friday after President Trump threatened to impose a fresh round of tariffs, this time aimed at Apple and the European Union.
The S&P 500 fell 39 points, or 0.7%, to close at 5,803, while the Dow Jones Industrial Average shed 256 points, or 0.6% to close at 41,603. The tech-heavy Nasdaq shed 189 points, or 1.0%.
“Just when markets believed the worst of the tariff battle had been overcome, President Trump threatened a 50% tariff against the EU this week, starting on 1 June, and a possible 25% tariff on iPhones produced abroad. This could all be a negotiating tactic, but the uncertainty caused by this back-and-forth is not good for global growth or markets,” Klaus Baader, an analyst with SG Securities, told investors in a report.
Mr. Trump said that he would impose a 25% tariff on Apple if the company did not shift some of their iPhone production to the U.S., a “frustrating situation for investors” said Daniel Ives, a tech analyst from Wedbush Securities in a Friday research note. Apple’s stock had fallen 3% by market close.
The president also posted that he would impose a “straight 50% Tariff” on the European Union, calling the group of countries “very difficult to deal with.”
“Our discussions with them are going nowhere!” he stated.
European markets reacted swiftly to Mr. Trump’s Friday morning shake-up, with France’s CAC 40 index losing 1.7%.
Looking ahead, Gregory Daco, chief economist at EY-Parthenon, predicts the markets will remain in a period of “extreme volatility” — especially with more tariff developments expected. “I think we should refrain from assuming that we’ve passed the worst in terms of trade policy announcements,” he said.
A 90-day pause on reciprocal tariffs will end on July 9, while a separate 90-day reduction in tariffs on Chinese goods will end in August. So far, the U.S. has publicly announced deals with China and the United Kingdom.
Yields on 10-year Treasury also experienced some pressure this week, ticking up before ultimately settling at 4.5% by Friday afternoon. Yields and bond prices have an inverse relationship, so as yield increase, bonds decrease, often a sign of diminishing confidence among investors.
The whipsawing in bonds comes as investors grow increasingly worried over the country’s debt burden, UBS said in a research note.
Moody’s Ratings downgraded the U.S. credit rating on March 16. The downgrade from the top rating of Aaa to Aa1 “reflects the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns,” the credit rating firm said in a statement that same day.
Meanwhile, a House Republican spending bill currently being shepherded through Congress is projected to add trillions to the nation’s debt.
Rising debt and the Trump administration’s ongoing tariff policies are creating two different realities for the equity and bond markets, Daco said.
“The equity market is much more focused on the positives and the potential adaptation of businesses to a higher tariff environment and the positives of having more fiscal spending,” he said.
“The bond market is much more worried about persistent trade tensions, rising budget deficits and an unsustainable fiscal trajectory.”
contributed to this report.
