Markets Reverse Gains As Trump's 104% China Tariff Announcement Rattles Wall Street

Wall Street's early rally lost steam and flipped into negative territory Tuesday afternoon after White House Press Secretary Karoline Leavitt confirmed that President Donald Trump's retaliatory 104% tariff on Chinese imports would take effect at 12:01 a.m. ET Wednesday.

Her remarks triggered a sharp deterioration in market sentiment and reignited fears of a global trade escalation.

By 2:15 p.m. ET, the S&P 500 – as tracked by the SPDR S&P 500 ETF Trust SPY – had slipped 0.3%, the Russell 2000 fell 1.3%, and the Nasdaq 100 was barely positive, up just 0.1%. The Dow Jones Industrial Average held onto a 0.3% gain, though upside momentum was fading fast.

What Triggered The Market Turnaround?

Leavitt’s remarks delivered clarity — and a hard deadline — for Trump’s escalating tariff campaign.

"There will be 104% tariffs going into effect on China tonight at midnight," Leavitt said.

"It was a mistake for China to retaliate, and the president is punching back harder."

The press secretary echoed Trump’s hardline stance, stating that "America does not need other countries as much as other countries need us," and emphasized that the president believes China wants to make a deal, but doesn't know how to start.

While earlier this week Trump hinted at openness to negotiations, Tuesday's update suggested no de-escalation in sight.

Leavitt insisted that tariffs are not up for delay or exemption, rejecting suggestions that market turmoil had prompted a policy shift.

She confirmed that the administration expects these trade deals and tariffs to generate "trillions of dollars in revenue" while incentivizing onshoring and closing U.S. trade deficits.

Earlier on Tuesday, Chicago Fed President Austan Goolsbee warned that the economic consequences of tariffs may already be materializing.

"We can't wait until the end of the quarter plus one month to find out that investment has dropped off and GDP growth is shrinking," Goolsbee said, calling for timelier insight into the drag from protectionist policy.

Tech Stocks Lose Steam, Semis Cool Off

After leading the rally earlier in the session, tech stocks began to falter.

Among the Magnificent Seven, Apple Inc. AAPL turned sharply lower, down 2.33%, while Tesla Inc. TSLA shed 0.85% and Amazon.com Inc. AMZN slipped 0.32%.

Only Nvidia Corp. NVDA continued to hold onto gains, up 2.43%.

Semiconductor stocks, which had gained over 3.3% by midday, then flipped to losses, with the iShares Semiconductor ETF SOXX down 0.4%.

Defensive sectors such as utilities and communications hovered near flat, while materials and consumer discretionary posted the steepest losses amid fears of disrupted global supply chains.

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