Deja Vu Disaster: How Trump’s Tariffs Tanked the Market, Again
Image via Investopedia
Well, that was rough. March 2025 will go down in history as the month the stock market decided to take an unplanned nosedive, leaving investors scrambling and economists debating what went wrong. While there’s no single villain in this story, one major factor keeps popping up: Trump’s tariffs. Yep, those same trade policies from his presidency came back to haunt the markets and the public in a big way. So, let’s look at how exactly these policies contributed to the crash.
Tariffs impact both everyday shoppers and businesses, driving up prices and creating headaches across the economy. For consumers, the tariffs make imported goods more expensive, pushing up overall costs, with banks estimating that they will add as much as 2% to the Consumer Price Index (CPI). That might not sound like a lot, but for families already dealing with tight budgets, it means higher grocery bills, pricier electronics, and less wiggle room for spending. On the business side, tariffs hike up the cost of materials and parts, forcing manufacturers to either eat the extra expenses, which hurts their profits, or pass them on to customers. Companies now need to find new suppliers or adjust operations, which will tangle supply chains. In short, tariffs didn’t just tax imports, they made life more expensive.
Then, the backlash hit. China and other trading partners of the US responded to Trump with their own tariffs, targeting key US exports like soybeans, cars, and whiskey. What started as a trade dispute now shook global markets, even threatening to send some into recessions. American farmers and manufacturers bore the brunt—soybean exports to China collapsed, auto shipments stalled, and bourbon producers lost market share. The trade war proved that tariffs don’t just protect domestic industries—they disrupt the entire economy, at home and abroad.
Markets plunged Thursday, with the Dow dropping 4% (1,700 points) and the S&P 500 falling 4.8%—their worst day since June 2020. The Nasdaq cratered 6%, its steepest decline since March 2020. Retailers and tech stocks led the sell-off. Nike (-14%), Best Buy (-18%), and Target (-11%) tumbled on supply-chain worries, while Apple (-9%) and chipmakers like Nvidia (-8%) dragged tech lower. Amazon, Meta, and Tesla each fell over 5%. Banks also took a hit as recession fears grew: Bank of America and Citigroup dropped 11%, while Goldman Sachs and Morgan Stanley slid 9%. The broad sell-off reflected deepening economic concerns. Wall Street’s fear gauge, the Cboe Volatility Index, or VIX, surged 50%. “Extreme fear” was the sentiment driving markets, with fear and greed indexes slumping to their lowest levels this year as investors braced for an escalating global trade war. When was the last time the stock market earnings looked this bloody red? It's eroding earnings equivalent to Italy's GDP, approximately $2.4 trillion, and bleeding investors’ money.
Stock market earnings on April 3. Image via @BRICSinfo on X
Moreover, the tariffs are expected to impact the U.S. economy permanently, reducing long-run real GDP by around 1% to 2%. The global economic implications are equally concerning, with the IMF estimating a 0.5% reduction in global economic growth through the upcoming year. These policies have now set the stage for a prolonged period of uncertainty, heightened inflation, and reduced economic growth, both domestically and internationally.
This is not just a temporary dip like the one we saw in January. The Magnificent 7 stocks (Apple, Microsoft, Amazon, Alphabet, Meta, Nvidia, and Tesla) could not escape the wrath of these tariffs, let alone smaller companies and the general public. As uncertainty looms, diversifying into inflation-protected Treasuries (TIPS) or high-quality corporate bonds may offer investors some more stability. With Trump back in office for another four years and tariffs remaining a cornerstone of his policies, international trade and our economies are in for a bumpy ride. Strap in and hang tight, everyone!
Sources:
https://edition.cnn.com/2025/04/04/economy/recession-trump-tariffs-intl/index.html
https://edition.cnn.com/2025/04/04/investing/stock-market-dow-tariffs/index.html
https://www.nytimes.com/2025/04/04/business/trump-stocks-tariffs-trade.html
