The ongoing sell-off in the U.S. markets intensified further on Thursday, sending the S&P 500 into correction territory after U.S. President Donald Trump threatened to impose 200% tariffs on wine, champagne, and other alcoholic products from France and other European Union countries in retaliation for the bloc’s 50% tariff on whiskey.

Trump’s threat came in response to a European Union plan to impose tariffs on American whiskey and other products next month—which itself is a reaction to Trump’s 25% tariffs on steel and aluminum imports that took effect on Wednesday.

Escalating trade tensions, fueling fears of a potential U.S. economic slowdown, have driven the S&P 500 index down another 1.4% on Thursday, closing more than 10% below its February 19 all-time high. Now, the broad market benchmark is officially in correction territory, joining the Nasdaq Composite, which entered a correction last week and extended its decline by another 2% yesterday.

The tech-heavy index is now down approximately 14% from its all-time high reached last month. The Dow Jones Industrial Average tumbled 1.3%, marking its fourth consecutive day of declines on Thursday, causing it to correct 9% from its February peak of 45,041 points, just short of entering correction territory, like its peers.

The small-cap benchmark Russell 2000 is approaching a bear market, down roughly 19% from its high. On Wall Street, corrections are defined as losses of 10% and bear markets are drawdowns of 20%.

Canada, a neighbor and close ally that is the biggest aluminum provider to the U.S., has also announced countermeasures to Trump’s metals tariffs and has taken the dispute to the World Trade Organization. Talks between U.S. and Canadian officials on Thursday failed to produce a breakthrough, Bloomberg reported.

Mexico, on the other hand, doesn’t plan to retaliate immediately against US import tariffs on aluminum and steel, The Wall Street Journal reported, citing Mexican President Claudia Sheinbaum. Mexico will instead see what the Trump administration does with its global reciprocal tariffs planned for next month, Sheinbaum reportedly said.

Trump has threatened to impose an array of trade penalties since returning to the White House in January, though he has postponed action on many of them. Trump imposed tariffs on about $1.4 trillion of goods imports from Canada, Mexico, and China—more than triple the $380 billion worth of Chinese merchandise hit with such levies during his first term, according to estimates from the Tax Foundation.

He later delayed and scaled back those threats on Canada and Mexico. But his efforts to rewire the US economy have rattled financial markets. In an interview, Trump acknowledged that his policies could cause short-term pain and did not rule out a recession, sending shockwaves across global markets as the U.S. accounts for 25% of the world’s GDP.

Wall Street analysts turn cautious on U.S. stocks

Amid Trump’s protectionist measures, S&P Global Market Intelligence is forecasting GDP growth to decline from 2.8% in 2024 to 1.9% in both 2025 and 2026, followed by 1.6% in 2027, according to a report cited by ANI.

Earlier, Goldman Sachs also slashed its 2025 GDP growth forecast to 1.7% from 2.4%, citing worsening trade policy expectations. Chief economist Jan Hatzius said the bank now expects the average US tariff rate to rise by 10 basis points this year, double its previous estimate.

Besides, Citigroup downgraded U.S. equities to Neutral and upgraded Chinese equities to Overweight, citing a pause in the so-called “U.S. exceptionalism,” with expectations that growth momentum in the world’s leading economy may lag behind the rest of the world (RoW) in the coming months.

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