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Stocks experienced a downturn on Tuesday afternoon, retracting earlier gains, as the Dow Jones Industrial Average faced a decline of 0.8%. This drop follows the Trump administration’s announcement of a 104% tariff on Chinese imports, set to take effect at 12:01 a.m. EDT on Wednesday.
The decline on Tuesday compounded a three-day market slump, which has resulted in the loss of trillions in market capitalization amid growing concerns over the economic repercussions of President Trump’s extensive tariff measures.
By the end of the trading day, the Dow Jones fell by 320 points, equating to a 0.84% decrease, closing at 37,645.59. The S&P 500 witnessed a 1.6% drop, and the Nasdaq Composite, which is heavily inclined towards technology stocks, decreased by 2.2%.
The Underlying Causes of the Market Drop
The market’s decline initiated on April 3, shortly after President Trump announced tariffs affecting imports from nearly all trading partners, which added to prior tariffs on sectors including automotive, steel, and aluminum. Economic analysts on Wall Street attribute potential inflation increases to these tariffs, as they are expected to be transferred to consumers, possibly hindering U.S. economic growth and raising recession risks.
Despite the morning optimism that followed the initial sell-off, which saw some investors buying stocks at reduced prices, this sentiment was short-lived. Hope was initially bolstered by comments from Treasury Secretary Scott Bessent, who indicated that negotiations were taking place regarding tariffs with various countries.
“I believe we can reach favorable agreements,” said Bessent. “Right now, President Trump holds significant negotiating power, and it would be unwise to assume otherwise.”
However, that optimistic outlook faded in the afternoon after White House spokesperson Karoline Leavitt confirmed that steep tariffs on imported goods from China would indeed be collected starting Wednesday.
CBS News 24/7 is addressing inquiries about tariffs during a special broadcast on Wednesday at 6 p.m. ET. Viewers can watch it live via the CBS News app on their mobile devices or connected televisions.
The drastic 104% tariff reflects an escalation in the ongoing trade war, with President Trump having previously threatened an additional 50% tariff on Chinese goods following an announcement from China regarding a 34% fee on U.S. imports.
China’s response came after Trump’s declaration of a specific 34% tariff rate on imports from China, indicating the targeted nature of these trade measures.
“Even if we see some reduction in tariffs proposed on April 2, the disruption to global trade remains significant and will likely result in adverse effects on economic growth—especially since the economy is already showing signs of a slowdown—while simultaneously pushing inflation rates higher,” noted Adam Crisafulli from Vital Knowledge in a recent research analysis.
Strategies in a Volatile Market
The brief rebound observed earlier in the day can be attributed to investors seizing the opportunity to acquire shares at lower prices following significant dips in the market. However, analysts caution that the persistent threat of tariffs casts a long shadow over the future growth potential of U.S. companies.
As corporate earnings season commences, Delta Air Lines is scheduled to release its earnings report on Wednesday, with major U.S. banks also set to announce their results on Friday. The airline industry, which had anticipated a robust performance in 2025, has been severely impacted by the ongoing tariffs.
Attention will likely be focused on the banks’ forecasts amidst escalating global trade tensions resulting from Trump’s trade policies. Additionally, on Thursday, the government will release its latest inflation figures, which could influence the Federal Reserve’s decisions regarding interest rates. Increased concerns about a potential U.S. recession due to the tariffs have led many economists to suggest that the Fed may need to consider rate cuts to stimulate economic growth.
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