Wall Street falls to its worst day since April after Trump threatens more tariffs on China

NEW YORK (AP) — A month-long calm on Wall Street was shattered Friday and U.S. stocks plunged after President Donald Trump threatened to raise tariffs on China much further.

The S&P 500 sank 2.7% in its worst day since April. The Dow Jones Industrial Average fell 878 points, or 1.9%, and the Nasdaq composite fell 3.6%.

Stocks were headed for a slight gain in the morning, until Trump took to his social media platform and said he is considering “a massive increase in tariffs” on Chinese imports. He is angered by restrictions China has imposed on exports of its rare earths, which are critical materials for manufacturing everything from consumer electronics to jet engines.

“We have been contacted by other countries who are extremely angry about this huge trade hostility, which came out of nowhere,” Trump wrote in Truth Social. He also said there “now appears to be no reason” to meet China’s leader Xi Jinping, after previously agreeing to do so as part of an upcoming trip to South Korea.

Rising tensions between the world’s largest economies led to widespread declines across Wall Street, with about six in seven stocks within the S&P 500 falling. Almost everything weakened, from big tech companies like Nvidia and Apple to stocks of smaller companies looking to weather uncertainty over tariffs and trade.

It’s possible that the market was primed for a crash. U.S. stocks were already facing criticism that their prices had jumped too high following the S&P 500’s almost relentless 35% rise from a low in April. The index, which dictates the movements of many 401(k) accounts, is still near its all-time high set earlier in the week.

Critics say the market looks overpriced after prices rose much faster than corporate profits. Concerns are particularly high about companies in the artificial intelligence industry, where pessimists see echoes of the implosion of the dot-com bubble of 2000. For stocks to appear less expensive, their prices need to fall or companies’ profits must increase.

Levi Strauss fell 12.6%, one of the market’s biggest losses, even though it reported a bigger profit for the latest quarter than analysts expected.

Its full-year earnings forecast was also within the range of Wall Street estimates, but the jeans and clothing company could simply be facing the challenge of higher expectations after a strong run. Its stock price hit the day up nearly 42% so far this year.

In total, the S&P 500 fell 182.60 points to 6,552.51. The Dow Jones Industrial Average fell 878.82 to 45,479.60 and the Nasdaq composite sank 820.20 to 22,204.43.

Some of Friday’s strongest action came in the oil market, where the price of a barrel of benchmark U.S. crude sank 4.2% to $58.90.

It fell when a ceasefire between Israel and Hamas in Gaza went into effect. The end of the war could eliminate concerns about oil supply disruptions, which had kept the price of crude oil higher than it otherwise would have been.

Losses accelerated after Trump’s tariff threat, which could affect global trade and lead the economy to burn less fuel. Brent crude, the international standard, fell 3.8% to $62.73 a barrel.

In the bond market, the 10-year Treasury yield sank to 4.05% from 4.14% late Thursday.

It had already been lower before Trump made his threats, as a report from the University of Michigan suggested sentiment among American consumers remains stagnant.

“Pocket issues, such as high prices and weakening job prospects, continue to be at the forefront of consumers’ minds,” according to Joanne Hsu, director of Consumer Surveys. “At this time, consumers do not expect significant improvement in these factors.”

The labor market has slowed so much that the Federal Reserve cut its main interest rate last month for the first time this year. Federal Reserve officials have planned further cuts through next year to give the economy additional breathing room. But Chairman Jerome Powell has also said they could change course if inflation remains high. This is because lower interest rates can cause inflation to rise even further.

A potentially encouraging sign from the University of Michigan’s preliminary survey said consumers’ inflation expectations for next year fell to 4.6% from 4.7% the previous month. While that figure remains high, the direction of the change could help the Federal Reserve and limit upward pressure on inflation.

In foreign stock markets, indices fell across much of Europe and Asia.

Hong Kong’s Hang Seng fell 1.7% and France’s CAC 40 fell 1.5% in two of the biggest moves. But South Korea’s Kospi rose 1.7% after trading reopened following a holiday.

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AP writer Teresa Cerojano contributed.