Wall Street tumbles 10% below its record after Trump escalates trade war

NEW YORK — Wall Street's sell-off hit a new low Thursday after U.S. President Donald Trump's escalating trade war dragged the S&P 500 more than 10% below its record, which was set just last month.

A 10% drop is deemed a correction by professional investors, and the S&P 500's 1.4% slide on Thursday sent the index to its first since 2023. The losses came after Trump upped the stakes in his trade war by threatening huge taxes on European wines and alcohol. Not even a double-shot of good news on the U.S. economy could stop the bleeding.

The Dow Jones Industrial Average dropped 537 points, or 1.3% Thursday, and the Nasdaq composite fell 2%.

The dizzying, battering swings for stocks have been coming not just day to day but also hour to hour, and the Dow hurtled between a slight gain and a drop of 689 points through Thursday's trading.

The turbulence is a result of uncertainty about how much pain Trump will let the economy endure through tariffs and other policies to reshape the country and world as he wants. The president has said he wants manufacturing jobs back in the United States, along with a smaller U.S. government workforce and other fundamental changes.

Trump's latest escalation came Thursday when he threatened 200% tariffs on Champagne and other European wines, unless the European Union rolls back a tariff it announced on U.S. whiskey. The European Union unveiled that move on Wednesday, in response to U.S. tariffs on European steel and aluminum.

U.S. households and businesses have reported drops in confidence because of all the uncertainty about which tariffs will stick from Trump's barrage of on-again, off-again announcements. That's raised fears about a pullback in spending that could sap energy from the economy. Some U.S. businesses say they've begun to see a change in their customers' behavior because of the uncertainty.

A particularly feared scenario for the economy is one where its growth stagnates but inflation stays high because of tariffs. Few tools are available in Washington to fix what's called stagflation.

There was good news Thursday, and it came on both those economic fronts.

One report showed inflation at the wholesale level last month was milder than economists expected. It followed a similarly encouraging report from the prior day on inflation that U.S. consumers are feeling.

A separate report, meanwhile, said fewer U.S. workers applied for unemployment benefits last week than economists expected. It's the latest signal that the job market remains relatively solid overall. If that can continue, it could allow U.S. consumers to keep spending, and that's the main engine of the economy.