In a bold renewal of his earlier trade policy, President Donald Trump’s renewed push for tariffs has shocked financial markets, causing investor anxiety and casting uncertainty over global trade flows. With the restoration of steep tariffs on Chinese goods and new levies on Mexican and Canadian imports, market participants are eating the crash of most stocks. They are scared of what is to come and the further impacts tariffs may have on the stock market.
“We’re looking at a highly destabilizing force entering the market at a time when inflationary pressures were just beginning to cool”, said Lisa Shalett, Chief Investment Officer at Morgan Stanley Wealth Management. “Tariffs, by design, act as a tax on trade, and investors are pricing in a slowdown in global commerce and potential hits to U.S. corporate profit margins”.
On April 15, Trump’s campaign confirmed plans for a 10% across-the-board tariff on all imports, alongside a 60% tariff on Chinese goods. The announcement sent ripples through Wall Street, as the Dow Jones Industrial Average dropped 520 points, or 1.4%, while the S&P 500 slid 1.1%. Technology stocks, particularly those with global supply chains, bore the brunt of the sell-off, with the Nasdaq Composite falling nearly 2%.
“Markets don’t like uncertainty—and this kind of tariff rhetoric introduces a lot of it”, said Mark Zandi, chief economist at Moody’s Analytics. “If implemented, these tariffs could shave as much as 0.5% off GDP growth next year and push inflation higher by 0.3 to 0.4 percentage points”.
Sectors most exposed to international trade, automotive, semiconductors, and industrials, saw sharp declines. Tesla Inc. fell 4.6% over the past week, and had concerns about rising input costs and potential retaliation from China, one of its largest markets. Meanwhile, chipmaker Nvidia Corp. dropped 5.3% as analysts cut forward earnings estimates tied to export restrictions and costlier components.
Major Risks
Retaliation from trading partners remains a key risk. China has hinted at tariffs on U.S. agricultural exports, which would particularly impact Midwest economies and firms like Deere & Co. and Archer Daniels Midland. “If the U.S. goes forward with a 60% tariff, we’re going to see blowback in soy, corn, and meat exports”, said Max Baucus, former U.S. Ambassador to China. “That will ripple through rural economies and hit companies hard”.
The market’s response is not just about headline risks but earnings fundamentals. In a note to clients, Bank of America strategists estimated that if the full suite of tariffs proposed by Trump is enacted, S&P 500 earnings could fall by as much as 7% in 2026, driven by higher costs and weaker overseas demand. “Investors need to think carefully about pricing power, supply chain flexibility, and geographic exposure”, the note said.
Jonathan, a DHS high school student is also being affected by these tariffs. He has some of his hard earned money in safer stocks, but has said he has lost a lot of it. “I hope the stock market has a recovery because I’m thinking of just pulling out all my money soon if I keep seeing a drop”, said Jonathan.
In bond markets, yields on the 10-year Treasury note have crept higher, touching 4.45%, as inflation expectations rise. Proponents argue that the policies protect American jobs and industries from unfair competition. “We are finally standing up to China”, Trump said at a rally in Michigan earlier this month. “No more cheating. No more taking advantage of American workers”.
Yet many economists argue the benefits are outweighed by the costs. “Tariffs might help select industries in the short term, but they hurt consumers and create inefficiencies”, said Douglas Holtz-Eakin, president of the American Action Forum. “Ultimately, they act as a drag on growth and sow chaos in financial markets”.
A recent AP-NORC poll revealed that 53% of Americans believe tariffs will lead to higher prices, with only 21% saying they believe tariffs will help the economy in the long run. Consumer confidence, as measured by the University of Michigan, dropped to a four-month low in April.
From a global perspective, the return of U.S. protectionism is drawing warnings. Kristalina Georgieva, Managing Director of the International Monetary Fund, noted, “A retreat from global trade will weaken the foundation of economic recovery and fragment supply chains just as they are beginning to normalize post-pandemic”.
Still, some investors are finding opportunity among the volatility. “We’ve rotated into U.S.-focused companies in the financial and healthcare sectors that are less exposed to international trade dynamics”, said Susan Schmidt, portfolio manager at Aviva Investors. “Tariff cycles create losers—but they also create relative winners”.
“The policy direction is still fluid”, said Evercore ISI’s senior political strategist Sarah Bianchi. “Markets will remain sensitive to campaign developments and any signs of re-escalation on the trade front”.
With volatility back in play and trade tensions once again shaping the investment landscape, analysts say investors should brace for more swings in equities. “We’ve seen this movie before”, Shalett added. “The question now is whether the sequel delivers the same market dislocation—or something more lasting”.
In a significant shift in the US trade policy, President Donald Trump announced a 90-day suspension on tariffs on most nations, aiming to ease the global economic tension and address the stock market volatility. This move, however, excludes China, with tariffs on Chinese imports increased to 125%, intensifying the trade conflict between the two countries. The announcement led to a substantial market rebound, with the S&P 500 experiencing its largest single-day gain since 2008, rising by 9.5%. Treasury Secretary Scott Bassent indicated that over 75 countries have expressed interest in negotiating new trade agreements during this pause, suggesting a potential realignment of global trade relationships. While the tariff suspension offers temporary relief, analysts caution that the long-term impact remains uncertain, particularly as the US-China trade tensions persist.
