S&P 500 slides into correction after Trump threatens 200% tariffs on European wines
Wall Street experienced a significant downturn on Thursday, with the S&P 500 dropping more than 10 percent below its record high from the previous month, according to BNN Bloomberg.
The decline placed the index in what professional investors call a “correction.” A 1.4 percent slide pushed the S&P 500 into its first correction since 2023.
The losses followed US President Donald Trump’s announcement of potential heavy tariffs on European wines and alcohol, escalating his trade war.
Despite positive economic reports, the downturn persisted. The Dow Jones Industrial Average fell 537 points, or 1.3 percent, while the Nasdaq composite dropped 2 percent.
Market volatility has intensified, with stock values fluctuating not just daily but within hours. On Thursday, the Dow shifted between a modest gain and a 689-point decline.
The uncertainty stems from concerns over how much economic strain Trump is willing to endure to implement his trade policies.
He has stated his goal of returning manufacturing jobs to the United States, reducing the federal workforce, and implementing broader economic changes.
The latest escalation occurred when Trump threatened 200 percent tariffs on Champagne and other European wines unless the European Union rescinded a recently announced tariff on US whiskey.
The European Union introduced the measure in response to existing US tariffs on European steel and aluminum.
Uncertainty over the potential longevity of Trump’s shifting tariffs has already impacted US businesses and households, leading to declines in confidence. This instability has raised fears of reduced consumer and business spending, which could slow economic momentum.
Some US companies have reported changes in customer behaviour due to the uncertainty.
A key concern for the economy is the risk of “stagflation,” where economic growth stagnates while inflation remains high due to tariffs.
Washington has limited tools to address this issue. Lowering interest rates to stimulate the economy could inadvertently drive inflation higher.
Despite the market turmoil, economic data released Thursday provided some relief. Inflation at the wholesale level was lower than expected, following a similar report the day before showing consumer inflation easing.
“The question for markets is whether good news on the inflation front can make itself heard above the noise of the ever-changing tariff story,” said Chris Larkin, managing director of trading and investing at E-Trade from Morgan Stanley.
Another report indicated that fewer US workers filed for unemployment benefits than economists anticipated, suggesting continued strength in the US job market.
A stable job market could support consumer spending, a key driver of economic growth.
In the stock market, artificial intelligence-related stocks extended their declines. Palantir Technologies, which offers an AI platform, fell 4.8 percent, while Super Micro Computer, a server manufacturer, dropped 8 percent.
Nvidia fluctuated between gains and losses before closing 0.1 percent lower. AI-related stocks have been at the centre of the recent sell-off amid concerns over overvaluation.
Other high-momentum stocks have also faced significant swings. Tesla declined 3 percent after two consecutive days of gains. The stock is down more than 40 percent in 2025.
Retailer American Eagle Outfitters dropped 4.1 percent after citing “less robust demand and colder weather” as factors limiting its performance.
The company projected a revenue decline for the upcoming year, though it exceeded profit expectations for the latest quarter.
In contrast, Intel surged 14.6 percent after appointing Lip-Bu Tan, a semiconductor industry veteran and former board member, as its new CEO.
Tan, 65, is set to assume leadership next week, replacing Pat Gelsinger, who abruptly retired more than three months ago amid a downturn at the chipmaker.
At the market close, the S&P 500 had fallen 77.78 points to 5,521.52. The Dow Jones Industrial Average lost 537.36 points to 40,813.57, while the Nasdaq composite declined 345.44 points to 17,303.01.
In the bond market, Treasury yields fell after an initial rise. The 10-year Treasury yield decreased to 4.27 percent from 4.32 percent.
Yields have generally declined since January, when they neared 4.80 percent, as traders adjusted expectations for US economic growth.
Although a recession is not widely expected, particularly with a relatively strong job market, consumer and business sentiment has weakened, according to recent reports.
International stock markets also saw declines, with indexes falling across much of Europe and Asia, though the drops were relatively modest.
