Monday’s sell-off in the US stock market was fueled by growing worries about how much the trade war will cost the world’s largest economy. In early trading, the S&P 500, which tracks the largest American companies, lost about 2%, while the Dow Jones and Nasdaq both lost more than 3.5%. The declines were caused by President Donald Trump’s warning instead of a “period of transition” when he dodged questions about whether the US economy was facing a recession or price increases as a result of tariff moves.
However, despite acknowledging that the price of some goods might rise, Commerce Secretary Howard Lutnick insisted that the US economy would not contract. Investors worry that the world’s largest economy’s growth will be hampered by tariffs, taxes placed on goods as they enter the country. Rachel Winter, an investment manager at Killik & Co., stated on the Today program, “The level of tariffs that Trump is imposing, I think no doubt, will have to cause inflation somewhere down the line.” According to economist Mohamed El-Erian, investors underestimated the likelihood of a trade war while overestimating Trump’s plans for deregulation and lower taxes. He stated that the adjustments made to those bets are reflected in the recent falls in the stock market, which began last week. He went on to say, “It’s a complete change in what the market expected.”
He pointed out that investors are also reacting to signs that households and businesses are beginning to hold off on spending due to the uncertainty, which could hurt economic growth. On Monday, European stock indices ended lower, with the CAC in France and the FTSE in London both ending roughly 0.9% lower. The German DAX closed down 1.75 percent. “Unease around the impact of Trump tariffs,” according to Hargreaves Lansdown stockbroker Susannah Streeter, head of money and markets. She went on to say that investors are worried about the US economy going into a recession. On Monday, shares of Tesla were down about 8%, while tech stocks Nvidia and Meta were both down over 4%. In an interview with Fox News that aired on Sunday but was recorded on Thursday,
Trump appeared to acknowledge the concerns when he said, “I hate to predict things like that,” in response to a question about whether the United States was going through a recession. We’re doing a lot, so there will be a period of transition. America is receiving wealth from us again. That is significant.” He went on to say, “It takes a little time, but I think it should be great for us.” According to the president of the United States, he has not done enough to stop migrants and illegal drugs from entering the country. The accusations have been rejected by the three nations. Last week, he slapped 25 percent tariffs on Canadian and Mexican imports, but just two days later, he exempted many of those goods. Additionally,
Trump increased the overall tariff on Chinese goods by 20%. Retaliation against the US is now possible, with China imposing new tit-for-tat tariffs on US farm products on Monday. They indicate that new tariffs of 10% to 15% will be applied to US exports of soybeans, wheat, pork, chicken, and beef. In response to the tariffs, Ontario Premier Doug Ford announced he would implement a 25% surcharge on energy exports to the United States. Ontario is Canada’s most populous province. “I will not hesitate to shut the electricity off completely” if Trump escalates, he warned.