In trading on Oct. 10, the main U.S. stock index, the S&P 500, was down 2% at the moment, the Dow Jones Industrial was down 1.3% and the Nasdaq Composite was losing about 2.5%. The "Magnificent Seven" stock index tracked by Bloomberg lost about 2.3%, and the VIX volatility index, known as a gauge of Wall Street fear, soared 35% to above 22 points. A level above 20 points is considered psychologically important for the VIX: a value less than that suggests low volatility.

The fall in markets on Friday became the largest since April, notes Bloomberg. Panic among investors after almost two months of calm was provoked by Donald Trump's statements about a possible "significant" increase in duties on imports from China amid disputes over rare-earth metals. Many market participants, confident that the toughest duties are behind them and companies have adapted to them, were unprepared for a new wave of escalation.

"For many investors, the topic of duties already seemed closed - the market was used to the status quo. However, a 'significant increase' in trade duties on imports from the country where the largest volume of goods comes from breaks this familiar pattern and forces a reassessment of expectations," said Dan Greenhouse, chief economist and strategist at Solus Alternative Asset Management LP.

"When things are going smoothly in the market, it's worth remembering that an unexpected factor can take you by surprise. The market has really rallied strongly and ignored a lot of red flags - this risk was not, in fact, built into current valuations," added PenderFund Capital Management Chief Investment Officer Greg Taylor.

It remains to be seen whether Trump's statements will escalate into a new round of trade conflict between the U.S. and China or be part of public negotiations, according to Nationwide Funds Group strategist Mark Hackett. "However, investors have opted to take a wait-and-see stance," he concluded.

This article was AI-translated and verified by a human editor

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