Against the backdrop of President Donald Trump's new tariff policy, global financial markets are experiencing their deepest weekly plunge since the COVID-19 pandemic. The S&P 500 index fell by 9.1%, marking the worst result since March 2020. Investors reacted quickly and harshly, expressing distrust in the radical changes to the US economic course.
Indices decline: economy on the brink
On Friday, the American S&P 500 index lost immediately 6% and ended the week with a total decline of 9.1%. The Nasdaq Composite dropped nearly 23% from its December peak, and the Russell 2000 small-cap index lost a quarter of its value from the November high. Such indicators point to an approaching bear market — a decline of more than 20% from the previous maximum, which is a signal of deep investor pessimism.
"The market shows a big thumbs down to this tariff policy," — noted veteran analyst Ed Yardeni.
Political decision, not an economic crisis
This time, the cause of financial turmoil was not global epidemics or bank failures, but the president's decision. Announcements of massive tariffs on imported goods triggered a global investment shock. Analysts cannot recall a similar case where a presidential decision so quickly caused a market collapse. The situation is compared with the disastrous budget initiative of British Prime Minister Liz Truss in 2022, which cost her her position.
Business and market reactions
Within two weeks before the tariffs announcement, investors had already withdrawn over $25 billion from American funds. After Trump's statement, the situation only worsened. J.P. Morgan analysts increased the likelihood of a recession in the US to 60%, Deutsche Bank lowered its economic growth forecast, and other banks expect inflationary pressure.
It is anticipated that the Federal Reserve System will be forced to intervene by lowering interest rates to support the economy.
Business about tariff chaos
Companies are in a state of shock. PIMCO Chief Investment Officer Den Ivaschin called the new tariffs a “material shock to the global economy.” “We may be entering a period where policy governs the economy, rather than the other way around,” he emphasized.
Gary Friedman from RH stated that their company relies heavily on imports from Asia, and therefore tariffs will painfully impact the business. Other top managers also acknowledge that the situation changes by the hour, creating chaos in planning.
International reaction
Other countries responded instantly to the US decision. China has already imposed a 34% retaliation, Canada introduced its own tariffs, and the European Union is preparing for decisive actions.
"Even well-coordinated tariffs look too high under the new conditions," — said Adam Hettes from Janus Henderson Investors.
$5 trillion in losses
In two days of sell-offs, more than $5 trillion in market value of companies from the S&P 500 index was wiped out. This is one of the largest losses in Wall Street history.
Despite optimistic statements from the president, the market shows no signs of stabilization. "My policy will never change," — Trump wrote on social media.
What’s next?
Although history shows that even the worst crashes pass, today businesses and consumers are restraining activity. They are waiting for stabilization or a change in course.
"I'm not sure that the current situation adds confidence to companies," — summarized Liz Ann Sonders from Charles Schwab. — "Rather, it only deepens uncertainty."
