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Stocks entered a correction on Thursday as the S&P 500 index fell more than 10% from its recent peak after President Donald Trump escalated the trade war with 200% tariffs on European alcoholic beverages. This swamped a better-than-expected wholesale inflation report that showed prices continuing to slow.
The Nasdaq Composite closed down almost 2%, the S&P 500 declined 1.4% on the day, and the Dow Jones Industrial Average lost 537 points, or 1.3%. Tesla (TSLA-3.40%) stock’s recent rebound ended, as it fell 3%.
“We aren’t too surprised about the volatility of this magnitude,” said Mike Reynolds, Glenmede’s VP for investment strategy. “It’s not just the tariffs themselves that have been proposed, it’s that uncertainty that there could be additional levies just around the corner.”
The Trump administration may deal another blow next month when it imposes “reciprocal” tariffs, as these are likely to fall on countries including Vietnam, India, and Indonesia that are alternatives to China as sources of low-cost goods, Reynolds told Quartz.
And any benefit from better-than-expected inflation reports this week could be eroded with the coming release of the February Personal Consumption Expenditures report — which Bank of America (BAC-0.71%) said may show that progress has stalled on core PCE, the Federal Reserve’s favorite price measure.
European wine and spirits companies’ shares fell on today’s tweet from Trump. In U.S. trading, Pernod Ricard fell 4.1%, Remy Cointreau (REMYY-4.73%) slid almost 4.8% and Davide Campari-Milano plunged about 4.6%. LVMH’s (LVMUY-2.55%) ADRs slid almost 2.8%, and Heineken’s (HEINY-1.98%) 2%. AB Inbev (BUD-1.94%) also fell.
The EU recently moved to hike its duties on imports of American whiskey to 50% in response to new U.S. tariffs on iron and steel from the bloc, which in turn drew today’s announcement from Trump.
If enacted, Trump’s new tariffs could result in price hikes for U.S. consumers at liquor and grocery stores and put pressure on the restaurant business. Most restaurateurs make 50% to 60% of their profit on wine and drinks, and their margins will be squeezed by higher prices.
Intel (INTC+14.02%) shares jumped 15% on the appointment of a new CEO and Dollar General (DG+5.74%) advanced 6.8% after earnings.