US stock indexes tumbled on Thursday, with heavyweight technology stocks suffering big losses, as US President Donald Trump's sweeping tariffs on major trade partners ignited fears of an all-out trade war and heightened the risk of a global economic recession.

Apple sank 8%, reeling from the impact of an aggregate 54% tariff on China, which is the base for much of the iPhone maker's manufacturing. Microsoft dropped 3% and Nvidia slumped 5.6%.

At 09:40 am ET, the benchmark S&P 500 dropped 3.1%, while the Nasdaq Composite fell 4.27% - with both indexes trading at a near seven-month low. The Dow Jones Industrial Average shed 2.6%.

Global stocks slumped, government bonds jumped and safe-haven gold touched a record high as Trump slapped a 10% tariff on most goods imported to the United States and much higher levies on dozens of rivals.

"This was the first bullet thrown in this trade war and it could get nasty and that is spooking investors. We're going to continue to trade on a heavy tone because of the heightened risk of either recession or stagflation," said Elias Haddad, senior markets strategist at Brown Brothers Harriman.

"We could see the correction bottom out when we have firm evidence that we're not falling into recession."

The CBOE Volatility index, known as Wall Street's fear gauge, touched a three-week high at 26.91 points.

The tariffs, poised to disrupt the global trade order and unsettle businesses, highlight a stark shift from just a few months ago when the promise of business-friendly policies under the Trump administration propelled US stocks to record highs.

The benchmark S&P 500 and the tech-heavy Nasdaq fell 10% from their record highs last month, marking a correction, as investors priced in the damage from tariffs on the economy and businesses.

Traders are ramping up expectations

for the Federal Reserve to cut interest rates at least three times this year, with the possibility of a fourth cut by the year's end becoming less of a long shot.

That heightens the significance of Friday's payrolls data and Fed Chair Jerome Powell's speech, which could offer crucial insights into the health of the U.S. economy and the future path of interest rates.

Data on Thursday showed the number of Americans filing new applications for unemployment benefits fell last week, pointing to continued labor market stability ahead of potential volatility from import tariffs.

"The prospect of looser monetary policy and potentially greater fiscal stimulus once the Trump administration announces the tax cut plan should provide some support to equity markets," Haddad added.

Retailers were hit hard on Thursday, with Nike dropping 11% and Ralph Lauren falling 12% after Trump imposed a raft of new tariffs on major production hubs including Vietnam, Indonesia and China.

Big banks such as Citigroup and Bank of America Corp , which are sensitive to economic risks, falling over 8% each. JPMorgan Chase & Co lost 4.5%.

The US small-cap Russell 2000 index tumbled 4%, underscoring concerns about the health of the domestic economy.

Oil stocks including Exxon Mobil and Chevron fell about 3.5% each as crude prices slumped 6% on Trump tariffs and OPEC+ speeding up output hikes.

Declining issues outnumbered advancers by a 5.33-to-1 ratio on the NYSE. and by a 5.79-to-1 ratio on the Nasdaq.

The S&P 500 posted 28 new 52-week highs and 50 new lows while the Nasdaq Composite recorded 13 new highs and 316 new lows.

Reuters