The US stock market suffered a significant setback on Thursday, losing nearly $2.5 trillion in value, following an announcement by President Donald Trump regarding increased tariffs on approximately 180 trading partners.

The President unveiled a 10% tariff on most US imports, coupled with steeper levies on specific countries, which the White House characterized as a measure necessary for national security and to ensure fair trade for American workers.

This announcement triggered a dramatic response in stock markets worldwide, with the US indexes experiencing their largest daily percentage declines since the onset of the COVID-19 pandemic.

In Australia, the stock market mirrored these declines.

The ASX dropped by almost 1% on Thursday, with a further decline of 2.44% noted at the close of business on Friday, marking a new 100-day low.

The All Ords index also fell sharply, registering a decrease of 2.55% at the same time.

Economists have highlighted that the trading landscape is particularly volatile in light of these developments.

Naoise McDonagh, a senior lecturer in geopolitics and international trade at Edith Cowan University, remarked that the reaction from the markets was extreme, attributing this to the unexpectedly high level of tariffs announced by President Trump.

AMP's Deputy Chief Economist Diana Mousina reaffirmed that while daily market fluctuations of this magnitude are not unheard of, the volatility observed in the market following the announcement was considered rare.

The severe downturn in the US stock markets was marked by the S&P 500 companies collectively losing approximately $2.4 trillion in value.

In particular, the technology sector faced steep declines, followed by communication and consumer discretionary sectors.

This widespread downturn reflects a substantial deviation from market expectations, as the tariffs enacted were perceived to be more aggressive than anticipated.

Investor behavior is likely to diversify in response to the shifting economic climate.

Mousina suggested that long-term investors might absorb short-term losses, particularly given potential offsets through other asset classes such as bonds, which have seen increased value amid the sell-off in equities.

Meanwhile, pressures on commodities have caused gold prices to soar to record highs, as it is traditionally viewed as a safe haven during times of economic uncertainty.

Furthermore, market analysts have noted that the fallout from these tariffs may extend beyond immediate losses, potentially influencing global trade relationships and investment strategies in the coming months.

The Australian mining sector may also face challenges, particularly companies with significant exposure to the Chinese economy, which could exacerbate the risks associated with these tariffs.

As the situation evolves, many market participants are advised to monitor ongoing developments closely.

McDonagh indicated that much remains uncertain until the full implications of global responses to the tariffs are understood.

In light of these complexities, short-term market movements may still reflect underlying investor sentiment regarding future economic stability.