Wall Street benchmarks slumped on Thursday, ending with the largest one-day percentage losses in years, as U.S. President Donald Trump's sweeping tariffs ignited fears of an all-out trade war and a global economic recession.

Investors fled from risky assets, seeking the safety of government bonds, after Trump slapped a 10% tariff on most U.S. imports and much higher levies on dozens of other countries.

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

Investors sold positions to reflect the new economic reality, with concerns about how other countries would react to Trump's Rose Garden proclamations.

China vowed retaliation, as did the European Union, which faces a 20% duty. South Korea, Mexico, India and several other trading partners said they would hold off for now as they seek concessions before the targeted tariffs take effect on April 9.

The coming days are expected to be volatile, as events unfold and the full effect of Trump's economic actions start to feed through into the wider economy. The CBOE Volatility index (.VIX), opens new tab, known as Wall Street's fear gauge, touched a three-week high.

"There are still a lot more questions than answers out here," said Steven DeSanctis, small and mid-cap strategist at Jefferies Financial Group.

According to preliminary data, the S&P 500 (.SPX), opens new tab lost 275.05 points, or 4.85%, to end at 5,395.92 points, while the Nasdaq Composite (.IXIC), opens new tab dropped 1,053.60 points, or 5.99%, to 16,547.45. The Dow Jones Industrial Average (.DJI), opens new tab fell 1,682.61 points, or 3.98%, to 40,542.71.

High-flying technology stocks suffered big declines after pushing Wall Street to record highs in recent years.

Apple (AAPL.O), opens new tab sank, reeling from an aggregate 54% tariff on China, the base for much of the iPhone maker's manufacturing. Nvidia (NVDA.O), opens new tab slumped, as did Amazon.com (AMZN.O), opens new tab.

U.S. stocks have lost ground since Trump took office in January, with the S&P 500 and the Nasdaq (.IXIC), opens new tab dropping 10% from record highs last month, marking a correction, as investors priced in the economic damage from the tariffs.

Traders are ramping up expectations for the Federal Reserve to cut interest rates four times this year, starting with a quarter-point cut in June.

"The Fed does have considerable firepower to help the market," said George Bory, chief investment strategist for the fixed income team at Allspring Global Investments.

Reuters