The stock market in the United States experienced a dramatic downturn on Tuesday, reversing an early rally, following the White House's announcement that President Donald Trump would proceed with his threat to impose tariffs on China exceeding 100 percent. This unexpected news sent shockwaves through Wall Street, leading to a sell-off across major indices.

The benchmark S&P 500 index closed down by 1.6 percent, marking a stark reversal from earlier gains that had approached 4.1 percent during the trading day. Similarly, the Nasdaq Composite index faced a setback, losing more than 2 percent. This volatility underscores a broader trend of uncertainty and fluctuation in US stocks, particularly as Trump had previously unveiled a plan to impose steep tariffs on numerous countries, potentially triggering an all-out trade war.

According to the White House announcement on Tuesday, additional tariffs of 50 percent on various Chinese goods will take effect just after midnight on Wednesday in Washington. This new levy adds to the “reciprocal” measures Trump announced last week, which, combined with prior tariffs, pushes the total duties imposed on Chinese imports to exceed an alarming 104 percent.

Earlier in the day, the White House had seemingly signaled a willingness to negotiate with US trading partners regarding the reduction of their tariffs. However, as the day progressed, mixed signals emerged, complicating the outlook for future negotiations. Washington has agreed to initiate talks with Japan, with US Treasury Secretary Scott Bessent emphasizing on Monday that Japan would be given “top priority” due to their prompt response to the situation.

In a related development, Trump took to his Truth Social platform to reveal that he had also communicated with the acting President of South Korea, suggesting that “we have the confines and probability of a great DEAL for both countries.” Despite these diplomatic overtures, tensions escalated between the US and China on Tuesday, as Beijing firmly declared its intention to “fight to the end” should the US move forward with the steep tariffs.

Just a day prior, Trump had announced his intention to implement an additional 50 percent tariff on Chinese goods, after China retaliated by indicating it would impose its own reciprocal duty of 34 percent on American products. This tit-for-tat exchange of tariffs has elevated fears of a full-blown trade conflict, affecting not only US markets but also global economic stability.

On a broader scale, European markets responded positively, with the region-wide Stoxx Europe 600 index, the UK’s FTSE 100, and Germany’s DAX all rising by approximately 2.3 percent on Tuesday, perhaps reflecting a degree of investor optimism in the face of rising tensions in the US-China trade relationship.

In currency markets, the US dollar fell by 0.3 percent against a basket of trading partners, indicating a potential decrease in confidence among investors regarding the US economy. Additionally, oil prices also took a hit, as the international benchmark Brent crude traded down by 3.8 percent, settling below $62 a barrel in the afternoon trading session in New York. West Texas Intermediate (WTI), the US oil marker, decreased by 3.7 percent to $58.46 per barrel. These price drops are particularly concerning, given that many American oil producers require prices to be higher in order to break even on their wells.