UPDATE: This article reflects the bank stocks’ market closing conditions.
Bank stocks sank Thursday, a day after President Donald Trump unveiled his plan to enact sweeping tariffs on all U.S. imports, sending shock waves through the global business world.
The KBW Nasdaq Bank Index fell by more than 9.8% by the time the market closed, as Wall Street reacted to news that the administration will impose tariffs of at least 10% on all imported goods, with even higher levies on countries including Japan, China and European Union nations. Vietnam, a major U.S. trading partner, faces a 46% tariff, while goods from Thailand face a 37% levy.
The KBW Nasdaq Bank Index, which tracks the performance of the 24 largest U.S. banks, has
Shares in Citigroup recorded the largest drop among the big banks, falling 12% for the day. The stock-price decline at Bank of America was 11%. At Goldman Sachs, Morgan Stanley and Wells Fargo, share prices slid 9.1% to 9.5%. JPMorgan Chase, the nation’s largest bank by assets, was the least severely affected, recording a nearly 7% stock-price decline by the end of the day.
Trump, whose tariff threats against U.S. allies and competitors have dominated much of his first 10 weeks in office, said Wednesday that the levies are a response to what he’s calling an economic emergency. The universal 10% tariffs are set to take effect on Saturday, according to media reports.
Trump described the event at the White House where he disclosed his plans as “liberation day.” Some analysts were skeptical of that slogan.
“It’s clear that the so-called ‘liberation’ day will have done little to reduce uncertainty and is potentially a starting point for negotiations rather than a clearing event,” Alastair Pinder, a global equity analyst at HSBC Global Market Research, wrote in a research note.
Pinder said he expects downward pressure on stocks to stick around in the near term and predicts that U.S. businesses “could end up hurting the most, given limited scope for substitution.”
Analysts at Morningstar DBRS said in a research note that the new tariffs represent “a significant escalation in the U.S. administration’s confrontational approach to trade.”
The consequences will be widespread, the Morningstar DBRS analysts added.
“In our view, the tariff plan, if implemented, is bound to slow economic growth in the near term, raise consumer prices and firms’ input costs, and decrease household wealth,” they wrote. “Moreover, many firms will likely remain hesitant to commit to major investments in the near term, as the tariff announcement is unlikely to quell policy uncertainty.”
Chris Nichols, director of capital markets at SouthState Bank in Winter Haven, Florida, said Thursday that the president’s latest salvo on tariffs infused uncertainty into the stock market and raised the specter of inflation and recession.
The biggest issue is “credit uncertainty,” Nichols told American Banker.
Recessions tend to drive up loan losses. But the unknowns also make it harder for businesses to make decisions about borrowing, which can curb loan demand.
In an interview before Trump’s latest barrage of tariffs was announced, Christopher Maher, chairman and CEO of Red Bank, New Jersey-based OceanFirst Financial, said there was “not a lot of anxiety” among his bank’s commercial clients. Many of them view tariffs as short-term negotiating tactics, he said.
Still, “it’s very difficult to understand what the ultimate impact might be,” Maher said Wednesday.
In March, Trump initiated an earlier round of tariffs against the E.U., China, Canada and Mexico — though certain levies were delayed until April — and several countries responded with retaliatory tariffs. Trump also imposed new levies on steel and aluminum imports coming from all countries.