The stock market experienced a dramatic downturn after President Donald Trump announced a surprisingly severe slate of tariffs on April 2, a date he termed “Liberation Day.” Within five trading days, the S&P 500 index had plummeted 19% from its high, as economists raised their recession forecasts and investors rapidly sold U.S. stocks. American financial markets are signaling alarm, leading to comparisons with the Great Depression. Despite a modest rebound in stocks on Tuesday, many investors are concerned President Donald Trump’s trade policies are sending shockwaves through the economy.
In the first three weeks of April, the Dow Jones Industrial Average fell by 9.1%, marking its worst April performance since 1932. The broader S&P 500 also plunged by 14% over Trump’s term, the worst performance for any president since records began in 1928. The US dollar has dropped 5.5% since the start of Trump’s new term, the worst start since data collection began with Gerald Ford’s presidency in 1974.
Notably, Trump’s first term also saw a significant decline, with the dollar falling 3%. As money flows out of US stocks and bonds, investments in foreign stocks have increased, with the MSCI All World index, excluding the United States, rising by 2.9% over Trump’s new term. Oil prices have also tumbled, falling 19% during Trump’s second term.
Traders are worried that a potential global recession might reduce demand for travel and shipping, drawing parallels to the economic conditions during Bill Clinton’s second term when oil prices fell by nearly 24%. Investors are flocking to gold, a traditional safe haven in times of economic uncertainty.
Stock market plunges amid Trump tariffs
Gold prices surged above $3,500 an ounce, a nearly 25% increase during Trump’s new term, which outshines the previous record held during Jimmy Carter’s start in 1977. Trump’s trade war continues to destabilize the global economy. The International Monetary Fund (IMF) noted the uncertainty caused by Trump’s policy shifts, particularly the April 2 tariff announcement, which has forced many businesses and analysts to alter their economic projections.
Goldman Sachs CEO David Solomon highlighted the negative impact of the uncertain policy environment on businesses, warning that it could hamper economic growth significantly. Many investors and business leaders increasingly believe President Trump will dial back his trade battles. Not everyone is willing to commit to that bet, but the sentiment is gaining traction, as evidenced by recent market behavior.
In recent earnings calls and public appearances, various business leaders, including Elon Musk, have voiced their opposition to President Trump’s trade war. This dissent aligns with the opinions of many investors who are becoming increasingly convinced that the White House will ease its protectionist trade threats to avoid significant economic downturns and adverse impacts on Americans’ stock portfolios. Jay Powell, the Federal Reserve Chair, has faced criticism from President Trump for not lowering interest rates more aggressively.
However, Powell has found support within the administration, particularly from Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick. The early economic indicators from Trump’s term paint a grim picture, with significant losses in stock markets, a declining dollar, volatile bond yields, tumbling oil prices, and surging gold prices. The global economy appears to be entering a period of uncertainty and potential upheaval, driven largely by trade tensions and policy unpredictability.
