A months-long period of calm on Wall Street was upended on Friday as US stocks tumbled following Donald Trump’s threat to impose significantly higher tariffs on Chinese imports.
The S&P 500 fell 2.1%, the Nasdaq Composite dropped 2.9%, and the Dow Jones Industrial Average declined 1.5%, putting markets on course for their worst session since April.
Earlier in the day, stocks had been edging higher until Trump posted on his social media platform, saying he was considering a “massive increase of tariffs” on Chinese goods.
The former president’s remarks came amid his frustration over China’s new export restrictions on rare earth materials, which are essential for manufacturing products ranging from consumer electronics to jet engines.
Trump’s Tariff Threat on China Sends Dollar Lower as Trade Fears Resurface
The US dollar slipped on Friday after Donald Trump threatened to sharply increase tariffs on Chinese imports, reigniting worries about how an escalating trade dispute could impact the US economy and global growth.
The remarks immediately boosted major currencies such as the pound, euro, and yen against the greenback, while commodity-linked currencies — including the Australian dollar — weakened on fears that renewed trade tensions could dent demand for raw materials.
“Ultimately, it does create a lot of negativity for the US economy,” said Juan Perez, director of trading at Monex USA in Washington. “Is China really going to have to be very retaliatory moving forward in order to get the United States to negotiate better? So it creates a lot of doubt.”
The dollar index fell 0.4% to 98.99, though it remains on track for a weekly gain of 1.66% — its strongest since September 2024 — after the yen and euro weakened earlier in the week due to domestic fiscal concerns.
Meanwhile, traders are closely watching for signs of when the US government shutdown might end and key economic data releases will resume, as this will help shape expectations for future Federal Reserve policy.
The US Bureau of Labor Statistics confirmed that September’s consumer inflation report will be published on October 24, allowing the Social Security Administration to determine the 2026 cost-of-living adjustment.
The update follows recent comments from Federal Reserve officials, who have voiced concern over persistent inflation risks.
“A lot of the easing that central banks either have done — or, in the case of the Fed, are considering — is being done with a very finely tuned sensitivity to inflation,” said Eric Theoret, FX strategist at Scotiabank in Toronto.
