Markets Plunge Amid Ongoing Tariff Turmoil

The chaos brought on by tariffs continues to shake the markets. On Sunday evening, U.S. stock futures took a nosedive following two turbulent sessions that erased over $5.4 trillion in market value. Monday’s opening was on track to take a sharp hit, edging the S&P 500 closer to a bear market—a grim signal for investors and the bigger economic picture.

Futures for the Dow plummeted by 1,500 points, equating to a 4% drop. S&P 500 futures dipped 4.3%, while Nasdaq futures fell by 4.7%.

The price of U.S. oil also suffered a decline, dropping over 3% to fall below $60 per barrel for the first time since April 2021. This freefall in oil prices is driven by investor fears that tariffs might tip the global economy into a recession, which would reduce demand for travel-related fuel consumption.

Bitcoin wasn’t spared either, dropping 5.6% to reach $78,736.93. It had previously soared beyond $100,000, fueled by hopes that Trump’s presidency would bolster cryptocurrency support.

These dramatic drops in futures occurred after the most significant two-day downturn for stocks in five years—since the pandemic. Markets have rejected President Donald Trump’s large-scale tariff strategy, parts of which took effect early Saturday, with more extensive tariffs slated for implementation on Wednesday. China’s fierce reaction on Friday, imposing a 34% tariff on all U.S. imports, heightened fears of a worsening trade war.

“The aggressive sell-offs last week foreshadow more turbulence on Monday,” said James Demmert, Chief Investment Officer at Main Street Research. “Investors are still unsure about the impact of tariffs and their repercussions, worrying that economic growth might come to a standstill or lead to a recession.”

Trump enacted a sweeping tariff on Saturday after signing an executive order earlier in the week, mandating a basic tax on all imports. This decision sparked widespread objection from U.S. trading partners, both friendly and otherwise, as well as from domestic businesses, investors, and consumers.

Starting Wednesday, America is set to impose sharply increased “reciprocal” tariffs on nearly 90 nations with the largest trade deficits with the U.S.

Besides this, Trump has introduced tariffs on autos, steel, and aluminum, with a 25% levy on certain goods from Canada and Mexico.

Additional tariffs loom on the horizon: tariffs on auto parts are scheduled to be implemented by May 3rd, and Trump has threatened tariffs on a wide range of other products including lumber, pharmaceuticals, copper, and microchips.

“The tariffs are certainly coming,” declared Commerce Secretary Howard Lutnick on CBS’s “Face the Nation” Sunday. “Trump meant what he said. Of course, they’re coming.”

The looming threat of recession has dominated Wall Street recently. JPMorgan analysts predicted last week that the tariffs would lead to a $660 billion yearly tax increase on Americans—the largest hike in recent memory. This move is expected to spike prices, increasing the Consumer Price Index, a key inflation metric, by 2%.

Should Trump continue with the tariffs announced on Wednesday, JPMorgan analysts foresee the U.S. and global economies slipping into recession by 2025. Last Thursday, they raised the risk of a recession to 60%, while Goldman Sachs recently estimated a 35% chance of a recession within the next year.

The Dow ended in a correction phase last Friday, dropping over 10% from its December high—a first in over three years. Meanwhile, the Nasdaq entered a bear market for the first time since 2022, down by more than 20% from its record high in December.

And the S&P 500 is teetering on bear market territory. It has decreased 17.4% since hitting an all-time high on February 19th, and it’s set to open Monday within bear market limits.

Investors seemed unassuaged by Trump’s meetings with various world leaders, potentially aimed at reaching agreements to reduce tariffs. A press conference with Israeli Prime Minister Benjamin Netanyahu is planned for Monday afternoon to discuss tariffs, among other topics.

Markets have suffered because these tariffs threaten to inflate prices for American companies and consumers. Unlike exporting countries, importers are the ones who incur tariffs, often passing these costs onto wholesalers, retailers, and eventually the consumers. While some retailers with strong supply chains might absorb part of the cost, others will struggle to do so.

Federal Reserve Chair Jerome Powell acknowledged on Friday that Trump’s tariffs, more aggressive than expected by the central bank, would hike prices and slow economic growth. Powell indicated that the Fed isn’t in a hurry to respond but is closely monitoring the tariffs’ economic impact.

The nonpartisan Tax Foundation warned that the tariffs announced on Wednesday would cost the average American household an additional $2,100 annually for goods. America’s average import tax is set to surge to 19% this year from 2.5% last year—the highest rate since 1933’s Smoot-Hawley era. Fitch Ratings further expects this rate to climb even higher, hitting the highest effective tariff rate seen in more than a century.

Consequently, the Tax Foundation predicts a 2.1% average decline in Americans’ after-tax incomes this year.

However, the market downturn might present a silver lining for investors, as stocks are now trading at a historically low 15 times future earnings projections. This could spur a market rebound if investors believe stocks are currently undervalued.

“We’re nearing a bottom,” Demmert suggested. “Stocks have dropped so dramatically because of indiscriminate, fear-driven selling. When this occurs, it often leads to significant rallies soon after.”