Stock markets in the US saw sharp declines on Monday, driven by growing concerns over the potential economic fallout from President Donald Trump’s tariffs. In Asia, markets initially fell on Tuesday but losses eased by the afternoon.
The market turmoil followed remarks by Trump in a weekend TV interview, in which he acknowledged that the US economy is going through a “period of transition.” When asked about suggestions of an impending recession, he downplayed the concerns but added that the nation is undergoing significant changes, particularly in terms of returning wealth to America.
Since Trump’s comments aired on Sunday, senior administration officials and advisors have made efforts to calm investor anxiety. Charu Chanana, an investment strategist at Saxo Bank, said, “The previous notion of Trump being a stock market president is being re-evaluated,” in an interview with the BBC.
In the interview, Trump appeared to acknowledge the economic uncertainties. “I hate to predict things like that,” he said. “There is a period of transition because what we’re doing is very big. We’re bringing wealth back to America. That’s a big thing.”
By Tuesday afternoon, Asian markets were still in the red: Japan’s Nikkei 225 dropped 1.1%, South Korea’s Kospi fell 1.2%, and Hong Kong’s Hang Seng Index lost 0.8%. On Monday, US markets saw similarly steep declines, with the S&P 500 ending down 2.7%, the Dow Jones Industrial Average falling 2%, and the Nasdaq suffering a 4% drop. Tech stocks were hit especially hard, with Tesla losing 15.4% and Nvidia, a leader in AI chips, falling more than 5%. Other tech giants like Meta, Amazon, and Alphabet also experienced significant losses.
The market’s volatile reaction reflects growing uncertainty about Trump’s tariff strategy. Tim Waterer, Chief Market Analyst at KCM Trade, remarked, “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.” Waterer added that while recession fears may be premature, the mere possibility of such an outcome is enough to make traders adopt a defensive stance.
After the market close on Monday, a White House official sought to reassure the public, saying, “We’re seeing a strong divergence between the animal spirits of the stock market and what we’re actually seeing unfold from businesses and business leaders.” The official emphasized that the business response to Trump’s policies, including tariffs, would be more telling for the economy’s long-term outlook.
In response to concerns about the economic impact of the tariffs, White House spokesman Kush Desai pointed out that “industry leaders” have pledged trillions of dollars in investment commitments, despite the ongoing trade tensions.
Last week, US markets had fallen to levels seen before Trump’s election victory in November 2016, when his administration’s promises of tax cuts and deregulation had initially excited investors. However, fears have mounted that Trump’s tariffs, which tax imports to the US, could lead to higher prices and slow economic growth.
Rachel Winter, an investment manager at Killik & Co, warned, “The level of tariffs that Trump is imposing, I think no doubt, will have to cause inflation somewhere down the line.” The president introduced these tariffs after accusing China, Mexico, and Canada of insufficient efforts to curb illegal immigration and the flow of illegal drugs into the US. Both China and Mexico have rejected these accusations.
Mohamed El-Erian, an economist, noted that investors had initially been optimistic about Trump’s economic plans, particularly regarding deregulation and tax cuts. However, they underestimated the likelihood of a trade war, which has led to the recent stock market downturn. El-Erian explained, “It’s a complete change in what the market expected,” and pointed out that businesses and households are increasingly delaying spending due to uncertainty, which could harm economic growth.
However, Kevin Hassett, Chairman of the Council of Economic Advisers to President Trump, has pushed back against the pessimistic outlook. In a CNBC interview, he argued there are plenty of reasons to be optimistic about the US economy, citing the return of manufacturing and jobs to the country due to the tariffs on China, Canada, and Mexico.
“There are a lot of reasons to be extremely bullish about the economy going forward,” Hassett stated, although he acknowledged some short-term data “blips” due to the timing of the tariffs and what he referred to as the “Biden inheritance.”
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