Dow Tumbles Below 40,000 as China's Retaliatory Tariffs Take Effect

A day after stocks on Wall Street saw a major rally in response to President Donald Trump's announcement that he was suspending tariffs on many U.S. trade partners, all three major indexes dropped as retaliatory Chinese tariffs went into effect.

The Dow Jones Industrial average fell below 40,000 points again in early trading Thursday morning, while the S&P 500 and Nasdaq composite also saw declines of about 5.5% and 6%, respectively.

"Nothing's over yet," President Trump said. "But we have a tremendous amount of spirit from other countries, including China. China wants to make a deal."

President Trump on Wednesday announced a 90-day pause on "reciprocal" tariffs on nearly all U.S. trade partners while increasing duties on Chinese exports to 125%. The White House said it was because China issued retaliatory tariffs on U.S. exports rather than try and negotiate a trade deal with the Trump administration.

Baseline 10% tariffs on all U.S. trade partners remain in place, as do 25% tariffs on steel and aluminum imports, and levies on foreign-made automobiles and parts.

Trade experts have warned that a sustained trade war between the U.S. and China could intensify global economic effects. World Trade Organization Director-General Ngozi Okonjo-Iweala said in a statement that such a confrontation could make global trade more fragile and lead to a reduction in global GDP.