Stocks plunge as Trump threatens China with massive tariff

U.S. stocks tumbled on Oct. 10 after President Donald Trump threatened a “massive increase of Tariffs on Chinese products” and suggested he might skip a planning meeting with Chinese President Xi Jinping in the coming weeks.

The broad S&P 500 fell 182.60 points, 2.7%, to close at 6,552.51, while the Dow Jones Industrial Average lost 878.82 points or 1.9%, to finish the session at 45,479.60. The tech-laden Nasdaq Composite index tumbled nearly 4%, losing 820.20 points to close at 22,204.43.

Financial markets have largely shrugged off the ongoing government shutdown, which marked its tenth day on Friday, Oct. 10, but reacted sharply to Trump’s comments, which were posted on the Truth Social online network.

“China really is our biggest trading partner and one that investors would like to see ongoing cooperation with. I do think it’s just that we need each other,” said Jack Ablin, chief investment strategist with Cresset Asset Management.

But another reason for the sharp sell-off may have been that stocks have repeatedly closed at fresh highs in recent days. “Certainly the enthusiasm surrounding AI, when you match it up to valuations, everything has to go right for stocks to continue to move higher,” Ablin told USA TODAY. “I don’t view expensive stock markets as a timing issue, but I do think it’s a headwind.”

While investors may be taking the shutdown in stride, there are signs that some of Washington’s policies are starting to weigh on American consumers. A closely watched survey of consumer sentiment from the University of Michiganreleased during the morning of Oct. 10 showed little movement overall, but a worrisome decline in one of its sub-components.

“The expectations index, which typically has provided a better guide to momentum in consumers’ spending historically—fell to 51.2—the weakest since May—from 51.7,” wrote Oliver Allen, senior U.S. economist with Pantheon Macroeconomics, in a research note.

“The headwinds facing households from the weak labor market and drag on real income growth from tariff-induced price increases suggest the 3% spending growth that now looks likely for Q3 overall is unsustainable,” Allen added.

One silver lining to the market turbulence may be lower borrowing costs. Treasury yields slid Oct. 10, with the 10-year U.S. Treasury yield down about 8 basis points to 4.069%. Gold extended its own winning streak: just days after closing above $4,000 an ounce for the first time, the precious metal tacked on a gain of about 1.5%.