Dow Drops 404 Points Amid Tariff Tensions
The U.S. stock market tumbled on Tuesday, May 6, as investors grew increasingly nervous about new trade tensions and awaited a crucial Federal Reserve policy decision. The Dow Jones Industrial Average fell 404 points, or 0.98%, to 40,814. The S&P 500 dipped 0.84%, and the tech-heavy Nasdaq lost 1.00%.
The sell-off erased some of the gains from the previous week as traders responded to heightened uncertainty over U.S. economic policy and world trade flows.
Trump’s Tariff Threats Shock Markets
Investor sentiment was soured after U.S. President Donald Trump over the weekend launched new trade strikes, including a 100% tariff on foreign films. He also ruled out any chance of near-term negotiations with Chinese President Xi Jinping and hinted at another major tariff—this time on pharmaceuticals—with details in two weeks.
Trump further stated that the cost impact on consumers would be offset by deregulating pharma companies based in the U.S., though markets are skeptical regarding the net result of such efforts.
Tesla Slides on Weak European Sales
Tesla was among the hardest-hit stocks, declining 2.46% as it exhibited signs of softening demand in Europe. The company only registered 512 new vehicles in the UK during March—a 62% year-on-year decline. The same declining patterns were replicated across key European markets like Germany, France, and Sweden, piling on more pressure to Tesla’s global prospects.
U.S. Trade Deficit Hits Record High
To further complement the gloomy scenario, America’s trade deficit soared to a record $140.5 billion in March from $68.6 billion a year earlier. The rise was led as firms rushed to import goods ahead of the new tariffs. The U.S. set records for imports from countries like Mexico and Vietnam, while imports from China fell to a five-year low amid a 145% tariff in place, the Commerce Department said.
All Eyes on the Fed
Traders are now turning their attention to the Federal Reserve, which announces its latest decision on interest rates this week. With inflation still a concern and protectionist policies on the rise, the Fed’s tone and forward guidance could have a powerful influence on markets in the coming days.
