Tariffs roil markets: Dow slumps while Nasdaq climbs to new heights

Why did tech stocks surge while industrial names slumped on the same day Trump’s tariffs took effect?

President Donald Trump’s sweeping 100% tariffs on imported semiconductors officially took effect this week, but Wall Street responded with a split verdict. The Dow Jones Industrial Average fell 0.5% and the broader S&P 500 dipped 0.1%, suggesting investor concerns over inflation and global supply chain disruption. Yet, in a sharp divergence, the tech-heavy Nasdaq Composite rose 0.4% to hit a fresh record high—fueled by targeted carve-outs that insulated U.S.-based semiconductor players from the tariff’s full brunt.

This bifurcation underscores the market’s increasing sectoral polarization, where traditional industrial and cyclical stocks suffer under protectionist trade shocks, while domestically anchored tech firms receive a bullish reprieve. The tariff plan’s selective enforcement has, at least temporarily, turned semiconductors into beneficiaries of geopolitical risk.

How did tariff exemptions for U.S.-manufacturing firms help tech names defy trade headwinds?

Although the 100% tariff headline rattled global investors, closer inspection revealed a nuanced implementation. Companies with meaningful U.S. manufacturing operations were spared the worst effects. According to Financial Times and Reuters, the White House confirmed that exemptions would apply to firms already investing in onshore chipmaking infrastructure—including tech giants like Apple Inc., Nvidia Corporation, and Taiwan Semiconductor Manufacturing Company Ltd.

The market took this as a strong signal. TSMC’s U.S.-listed shares rose nearly 5% amid optimism around its Arizona fab strategy. Samsung and South Korea-based SK Hynix also gained ground on expectations that long-term U.S. investment plans could secure partial relief. The VanEck Semiconductor ETF rose broadly, while Apple surged 3% after pledging a $100 billion domestic investment—publicly announced during a press event with President Trump.

While companies like AMD and Broadcom were also viewed favorably, exact stock percentage moves varied intraday and across trading platforms. Still, the overarching message was clear: carve-outs and strategic alignment with U.S. industrial policy are now driving tech stock resilience, even in the face of heightened trade tensions.

What do the latest tariff data and expert commentary suggest about the broader economic impact?

Behind the stock market divergence, macroeconomic indicators present a more sobering picture. According to recent data from the Yale Budget Lab, the United States’ average effective tariff rate has climbed to 18.4% as of July 30, 2025—its highest sustained level in nearly nine decades. This is consistent with previous monthly snapshots showing the escalating burden of cumulative trade actions.

Though the White House frames the tariffs as a tool to reindustrialize America, many economists remain wary of the potential fallout. Mark Zandi, Chief Economist at Moody’s Analytics, recently warned that such high trade barriers could lead to a stagflation-like environment—where inflation persists even as growth slows. And while supporters view tariffs as a mechanism for reshoring manufacturing and reducing geopolitical risk, detractors argue they function as a stealth tax on consumers and small businesses.

The concern is not merely theoretical. Recent estimates suggest that between 50% and 70% of tariff-related costs are being passed down the value chain to end users—raising prices on electronics, autos, and consumer goods. That dynamic is likely to worsen if retaliatory measures emerge from key trading partners.

Why is Wall Street split on the long-term implications of Trump’s trade policy?

The investor community appears increasingly divided on whether tariffs will create structural value or systemic risk. On one side, institutional buyers see the tariff regime as an opportunity for domestically focused technology companies to expand margins under government protection. On the other, fund managers with exposure to industrials, consumer discretionary, and export-dependent sectors view the policy as a material headwind.

Part of this divergence stems from visibility. Semiconductor and digital infrastructure companies have received public policy clarity and investment commitments, allowing for forward modeling. By contrast, traditional sectors tied to global manufacturing pipelines still face uncertainty about future costs, component sourcing, and price elasticity.

That bifurcation is now driving capital rotation. Passive and active funds alike are shifting toward firms that can demonstrate policy alignment—especially those expanding domestic capacity, leveraging automation, and maintaining high-margin software revenues. Meanwhile, blue-chip names in auto, aerospace, and consumer retail are underperforming broader benchmarks.

Should investors treat this rally in semiconductor stocks as durable or policy-dependent?

While the short-term upside in semiconductor and tech names has been substantial, there are valid concerns about sustainability. The current carve-outs are executive actions and could be rescinded, restructured, or reversed by future administrations or court rulings. Moreover, retaliatory tariffs from countries like China, South Korea, or the European Union could trigger a new round of uncertainty for U.S.-based manufacturers.

There’s also a longer-term concern around capital intensity. Semiconductor fabrication plants require billions in upfront investment and years to become operational. Labor shortages, equipment delays, and raw material constraints could impair promised timelines—and erode the competitive edge that exemptions currently offer.

For these reasons, investors may want to approach the current rally with caution. A portfolio tilted entirely toward tariff beneficiaries may lack resilience if the geopolitical calculus shifts or if macro conditions deteriorate. A balanced approach—favoring both U.S.-centric growth names and multinationals with pricing power and regional diversification—may be more appropriate for navigating a volatile trade environment.

Is this divergence between Nasdaq and Dow a short-term reaction—or a signal of structural decoupling?

While the Dow and Nasdaq often diverge on tech-heavy days, the magnitude of this decoupling has raised eyebrows. A 0.5% drop in the Dow versus a record high in the Nasdaq underscores the uneven nature of current U.S. economic policy and investor sentiment. Some analysts argue that this signals a structural realignment, where “old economy” names bear the brunt of protectionism while “new economy” firms adapt more easily to government incentives and platform-based growth.

However, others caution against overinterpreting a single session or week. The Dow’s composition includes multinational manufacturers and financials highly sensitive to input costs and interest rates—two areas where uncertainty remains elevated. By contrast, the Nasdaq’s tech firms often benefit from subscription-based revenue models, scalable cloud platforms, and intellectual property moats, making them more agile in the face of global trade shifts.

Ultimately, the durability of this divergence will depend on whether Trump’s tariff policy deepens and whether domestic incentives continue to cushion selected industries from global backlash. If exemptions remain generous and predictable, tech could continue its outperformance. But if retaliatory measures or inflationary aftershocks hit consumer spending, the Nasdaq’s gains may prove short-lived.