Financial markets have had a tumultuous week as stocks fell for the second day in a row over concerns about new US tariffs and economic fallout from the outlook for the World Trade War.
President Trump’s announcement Sudden tariffs On Wednesday, it shocked investors, sent economists and ran around to revise US economic growth forecasts downwards. Federal Reserve Chair Jerome Powell also warned that taxation, including a 10% universal obligation on all US imports and “mutual” tariffs in nearly 90 countries, is likely to fall into the economy.
“Uncertainty remains rising, but it is clear that tariffs will rise significantly more than expected,” Powell said. I said in my speech on Friday In Arlington, Virginia. “The same could be true of economic impacts, including higher inflation and slower growth.”
The S&P 500 fell to 322 points (nearly 6%) and closed to 5,074. This is the biggest day slump on a wide range of indexes since losing 12% since March 16, 2020. Today’s plunge erased a $2.7 trillion market value from the index. This decline wiped out stock market profits for more than a year, bringing the S&P 500 back to level in February 2024.
The Dow Jones industrial average has sunk 2,231 points (5.5%), a 14% decline since peaking in February. The NASDAQ composite slid 963 points, or 5.8%. That is, if the Tech Heavy Index is currently on the Bear Market or if the stock price has dropped at least 20% from the latest increase.
High-tech stocks are worried about US tariffs on China this week. Measures from Beijing – Injures the tech sector, which is key to promoting corporate profits.
“The economic pain caused by these tariffs is difficult to explain and can essentially trace the US high-tech industry back to ten years, but while China is moving forward,” Wedbush Securities’ Dan Ives said in the report.
Solita Marcelli, chief investment officer at UBS Global Wealth Management, told clients that the US could fall into a recession later this year, unless the US moves to ease tariffs.
“We believe effective tariff rates could be even higher in the short term, and we are likely to enter a negative scenario, such as a meaningful US recession and a decline in stock markets without President Trump taking aggressive steps to cut tariffs over the next three to six months,” he said in a research note.
Freefall has wiped out trillions of dollars in investor wealth, marking the biggest two-day decline in the S&P 500 and NASDAQ since March 2020 when the pandemic began.
Drops of this size are not unheard of on Wall Street, but they are rare. In the past 25 years, the S&P 500 has dropped 4% 38 times per day, according to Adam Turnquist, chief technical strategist at Brokerage Firm LPL Financial.
The overseas markets also slid on Friday. Overnight trading in Asia saw Tokyo’s Nikkei 225 drop by 2.8%, while Korean Cospi sank 0.9%. In European trade, German DAX lost 2%, Paris’s French CAC 40 was immersed by 1.6% and UK’s FTSE 100 was immersed by 1.7%.
US growth has been downgraded
Economists have downgraded the outlook for US economic growth this year as Trump loads tariffs on a growing list of countries, warning that taxation is likely to boost inflation. This could potentially reduce consumer spending. Consumer expenditures not only account for more than two-thirds of the country’s economic activity, but also curbs corporate investment.
Import taxes are primarily borne by companies. Companies usually pass on a portion of the added expenses to consumers or a portion of them. As a result, the Americans were able Faces a higher price According to the economist, electronics, home appliances, cars, clothing, furniture, foods such as coffee and chocolate.
“In the future, higher tariffs will likely be progressing through our economy and raise inflation in the coming quarters,” Powell said Friday.
According to the Tax Foundation, a non-partisan policy research firm, tariffs in the Trump administration could cost households over $1,900 this year.
David Lefkowitz, head of US equity at UBS Global Wealth Management, believes that US trade officials will ultimately lower tariff rates when they negotiate with their overseas counterparts. However, the process is likely to take time, and investment banks do not expect a quick reversal of US tariffs. As a result, UBS economists have reduced their forecast for US economic growth this year to below 1%.
China fights back
Investors are also nervous as the US tariff barrage encourages retaliation from key trading partners. China said on Friday it would impose 34% tariff on imports Of all products in the US from April 10th.
China’s Commerce Department also said that implementing more stringent restrictions on exports of rare earth exports (materials used in products such as computer chips and electric vehicle batteries) would impose trade sanctions on 27 additional US companies.
“This is an offensive and escalating response that marks a close contract to end the trade war between the two superpowers,” an analyst at Capital Economics said in a research note.
More positive news for financial markets is US employers Added 228,000 jobs In March, it will far surpass analyst forecasts. The country’s unemployment rate rose slightly to 4.2%, but at 4.1% in February.
However, despite job growth robust last month, experts say the government’s latest employment numbers don’t reflect the impact of trade policies on the Trump administration’s economy.
“For investors looking at the portfolio, it may feel like an operation done without anesthesia,” Brian Jacobsen, chief economist at Annexwells Management, said of this week’s downdraft of stock.
I contributed to this report.
