US stocks are surrendering more than half of their historic gains from the day before as President Donald Trump's trade war continues to confuse and threaten the economy, even if its temperature has cooled a bit.

The S&P 500 was down 5 per cent in midday trading, slicing into Wednesday's surge of 9.5 per cent following Trump's decision to pause many of his tariffs worldwide. The Dow Jones Industrial Average was down 1,701 points, or 4.2 per cent, as of 12:10 pm Eastern time, and the Nasdaq composite was 5.7 per cent lower.

“Trump blinks,” UBS strategist Bhanu Baweja wrote in a report about the president's decision on tariffs, “but the damage isn't all undone.”

Trump has focused more on China, raising his tariffs on its products to well above 100 per cent. Even if that were to get negotiated down to something like 50 per cent, and even if only 10 per cent tariffs remained on other countries, Baweja said the hit to the US economy could still be large enough to hurt expected growth for upcoming US corporate profits.

The losses for US stocks accelerated Thursday after the White House clarified that Chinese imports will be tariffed at 145 per cent, not the 125 per cent rate that Trump had written about in his posting on Truth Social Wednesday, once his previous 20 per cent fentanyl tariffs were included.

“Everything is still very volatile, because with Donald Trump, you don't know what to expect,” said Francis Lun, chief executive of Geo Securities. “This is really big uncertainty in the market. The threat of recession has not faded.”

China, meanwhile, has reached out to other countries around the world in apparent hopes of forming a united front against Trump.

The stock price of Warner Brothers Discovery, the company behind “A Minecraft Movie,” dropped 13.5 per cent for one of Wall Street's sharpest losses after China said Thursday it will “appropriately reduce the number of imported US films.” The Walt Disney Co's stock sank 7.6 per cent.

A spokesperson for the China Film Administration said it is “inevitable” that Chinese audiences would find American films less palatable given the “wrong move by the US to wantonly implement tariffs on China."

That was after Trump and his Treasury secretary, Scott Bessent, sent a clear message to other countries Wednesday after announcing their tariff pause: “Do not retaliate, and you will be rewarded.”

The European Union on Thursday said it will put its trade retaliation measures on hold for 90 days and leave room for a negotiated solution.

It all demonstrates why many on Wall Street are preparing for more swings to hit markets, after the S&P 500 at one point nearly dropped into a “bear market” by almost closing 20 per cent below its record.

Often, the whipsaw moves have come not just day to day but also hour to hour. The S&P 500 still remains below where it was when Trump announced his sweeping set of tariffs last week on “Liberation Day.”

One encouraging signal had been coming from the bond market, where stress seemed to be easing.

The bond market has historically played the role of enforcer against politicians and economic policies it deemed imprudent. It helped topple the United Kingdom's Liz Truss in 2022, for example, whose 49 days made her Britain's shortest-serving prime minister.

James Carville, adviser to former US President Bill Clinton, also famously said he'd like to be reincarnated as the bond market because of how much power it wields.

Earlier this week, big jumps for US Treasury yields had rattled the market, so much that Trump said Wednesday he had been watching how investors were “getting a little queasy.”

Several reasons could have been behind the sharp, sudden rise, including hedge funds having to sell their Treasurys in order to raise cash or investors outside the United States dumping their US investments because of the trade war.

Regardless of the reasons behind it, higher yields on Treasurys crank up pressure on the stock market and push rates higher for mortgages and other loans for US households and businesses.

But the 10-year Treasury yield has calmed over the last day, following Trump's U-turn on tariffs, and had fallen all the way back to 4.30 per cent shortly after the release of a better-than-expected report on inflation in the United States.

That's after it had shot up to nearly 4.50 per cent Wednesday morning from just 4.01 per cent at the end of last week.

But the yield began climbing again as the morning progressed, reaching 4.37 per cent.

In stock markets abroad, indexes rallied across Europe and Asia in their first chances to trade following Trump's pause. Japan's Nikkei 225 surged 9.1 per cent, South Korea's Kospi leaped 6.6 per cent and Germany's DAX returned 4.5 per cent. (