The S&P 500 closed below 5,000 for the first time in nearly a year after a strong start to the session on Tuesday, amid growing concerns about a global trade war as the Trump administration prepares to raise tariffs on China at midnight.

At 4:00 p.m. ET (21:00 GMT), the Dow Jones Industrial Average was down 320 points, or 0.8%, the S&P 500 was down 2% to close at 4,987.76 and the Nasdaq Composite was down 2.2%. The S&P 500, which rose about 4.1% at its high on the day, closed below 5,000 for the first time since April 19, 2024.

Global trade war fears mount as tariffs on China emerge

President Trump on Monday reiterated his administration's commitment to reciprocal tariffs, downplaying the chances of negotiations. The president doubled down on a threat to impose an additional 50% tariff on Chinese goods if China does not reverse a recent 34% tariff increase on U.S. products by April 8, 2025.

The tariffs on China, totaling about 104%, are expected to go into effect at midnight. Investors had hoped the president would halt the tariff hike on China, but the White House confirmed that the tariffs would go into effect. However, Treasury Secretary Scott Bessent indicated that the administration is open to negotiations aimed at reducing trade barriers, saying that "probably close to 70" countries, including Japan, have contacted the White House about tariff negotiations.

Additionally, the Washington Post reported that Tesla (NASDAQ:TSLA) CEO Elon Musk made a direct plea to Trump to drop tariffs over the weekend.

Tariffs are widely seen as a tax on American consumers, but U.S. Trade Representative Jamieson Greer said in testimony before the Senate Finance Committee later that the costs of the tariffs rarely reach consumers.

The economic calendar is largely empty on Tuesday, with most attention focused on the latest consumer price index report due Thursday for guidance on the country's inflation outlook.

Chicago Federal Reserve Bank President Austan Goolsbee acknowledged Tuesday that the Trump administration's tariffs were harsher than expected.

UBS, however, sees potential for a U.S. monetary policy shift if equity markets weaken further, arguing that a 5%–10% decline in the S&P 500 from current levels could be enough to trigger Federal Reserve action. (Newsmaker23)

Source: Investing