The world’s financial markets have been thrown into turmoil following President Trump’s announcement of sweeping global tariffs.
Stock market next week: D-Street closed for 2 days; Tariff war, Q4 results among key factors to watchhttps://t.co/OqR19r4ak0
— ET NOW (@ETNOWlive) April 13, 2025
Stock indexes in the U.S., Asia, and Europe have plummeted as investors fear the tariffs and retaliatory measures from trading partners could lead to a global recession. The S&P 500 has been highly volatile, ending lower on Tuesday after another chaotic day of trading.
OOPS! US treasury yields see biggest weekly jump since 2001 as cash flees. 10y yields jump 50bps, rivals historic meltdowns. The bond market selloff was triggered by President Donald Trump's trade war and erratic tariff moves, which undermined confidence in the economy and US… pic.twitter.com/982qhVX0vC
— Holger Zschaepitz (@Schuldensuehner) April 11, 2025
Experts warn that while the stock market can sometimes be a misleading indicator of the broader economy, the recent sell-off is sending a clear message: investors believe the tariffs will result in higher prices, slower growth, and potentially a recession. The direct impact of the tariffs will be felt most by low- and moderate-income consumers, who spend a larger portion of their income on goods subject to the duties. However, the stock market declines will hit higher earners the hardest, as they own a disproportionate share of stocks and investments.
For a brief period on April 9th, the financial system itself seemed at risk. The yield on ten-year Treasury bonds, typically among the safest assets, jumped to 4.5% from 3.9% just days earlier. This simultaneous failure of both risky and safe assets threatened to destabilize the entire financial system.
"The financial system came perilously close to the brink, & it is important to understand why, since the turbulence may well return…Volatility gauges, derived from the insurance premiums traders pay to protect themselves from wild swings, have soared…"https://t.co/GS6YSP3Id5
— W. Gyude Moore (@gyude_moore) April 12, 2025
Trump tariffs rattle global markets
The ongoing trade war between the U.S. and China has only added to the uncertainty in the markets. China’s leverage with rare-earth exports, crucial for many industries, and the unpredictability of rapidly changing trade policies have heightened anxiety among investors and policymakers.
As the tariffs took effect on Wednesday, China announced it was raising retaliatory duties on U.S. imports from 34% to 84%, while the EU agreed to impose duties of up to 25% on U.S. imports starting next week. Canada also instituted 25% duties on some U.S.-made automobiles and all U.S.-made auto parts in response to the tariffs. Economists are sounding alarms about the potential consequences of the tariffs.
Wells Fargo analysts predict a “modest” stagflationary “shock” to the U.S. economy, with prices rising and eroding real income growth, leading to a contraction in spending and overall economic activity. JPMorgan analysts echo these concerns, noting that the pinch from higher prices may hit harder than the post-pandemic inflation spike. The financial markets remain on the precipice, underscoring the fragility of America’s financial infrastructure in the face of cascading pressures.
Robust policy responses and international cooperation are critical in navigating these tumultuous times, as the full effects of this historical shift in trade policy may take weeks, months, or even quarters to be fully realized.
