Stock Markets Drop Amid Concerns Over Trump’s Tariff Policies
Global stock markets have declined following concerns over the economic impact of President Donald Trump’s tariffs.
The downturn came after Trump, in a televised interview, described the U.S. economy as being in a "period of transition" when asked about the possibility of a recession.
Since the interview aired on Sunday, top Trump administration officials have attempted to reassure investors.
"The previous notion of Trump being a stock market president is being re-evaluated," said Charu Chanana, an investment strategist at Saxo Bank.
Market Reaction
In Asian markets on Tuesday morning:
- Japan’s Nikkei 225 fell 1.7%
- South Korea’s Kospi dropped 1.3%
- Hong Kong’s Hang Seng Index declined 1%
In U.S. markets on Monday:
- The S&P 500 closed 2.7% lower
- The Dow Jones Industrial Average dropped 2%
- The Nasdaq, which is tech-heavy, plunged 4%
Tech stocks were hit hardest:
- Tesla shares plunged 15.4%
- Nvidia, a leader in AI chips, lost over 5%
- Other major tech firms, including Meta, Amazon, and Alphabet, also saw significant declines
Investor Uncertainty
Market analysts say the uncertainty surrounding Trump’s trade policies is weighing on investor sentiment.
"Trump is keeping political leaders guessing regarding his next moves on tariffs, but the problem is that he's also keeping investors guessing, and that's reflected in the dire market mood," said Tim Waterer, chief market analyst at KCM Trade.
Concerns over a potential recession have also led investors to adopt a cautious approach.
White House Response
After Monday’s market close, a White House official downplayed the stock market’s volatility, stating:
"We're seeing a strong divergence between the stock market’s sentiment and what’s actually happening in business activity. The latter is obviously more meaningful in the long run."
Later, White House spokesman Kush Desai emphasized that Trump’s economic policies, including tariffs, had attracted "trillions in investment commitments" from industry leaders.
Tariff Impact and Economic Outlook
Investors are increasingly worried that Trump’s tariffs—which are taxes on imported goods—could lead to higher consumer prices and slower economic growth.
"The level of tariffs that Trump is imposing will, no doubt, cause inflation somewhere down the line," said Rachel Winter, an investment manager at Killik & Co.
The tariffs were introduced following Trump’s accusations that China, Mexico, and Canada were failing to curb illegal drugs and migrant flows into the U.S. However, all three countries have rejected these claims.
Economist Mohamed El-Erian noted that investors had initially underestimated the risk of a trade war, focusing instead on Trump’s promises of tax cuts and deregulation.
"It’s a complete shift from what the market expected," he said, adding that businesses and households are now becoming hesitant to spend and invest, which could further weaken economic growth.
Trump’s Economic Advisers Push Back
Despite the growing concerns, Kevin Hassett, an economic adviser to Trump, remains optimistic.
Speaking to CNBC, Hassett argued that tariffs on Canada, Mexico, and China were already bringing back manufacturing and jobs to the U.S.
"There are a lot of reasons to be extremely bullish about the economy going forward," he said.
While admitting there were some "blips in the data" this quarter, he attributed them to the timing of Trump’s tariffs and what he called the "Biden inheritance."
