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Markets experienced a dramatic downturn following President Donald Trump’s announcement of a sweeping tariff regime on Wednesday. The move has triggered widespread concern among economists, investors, and trade experts, with fears mounting over a potential recession. Here’s a detailed breakdown of the market reaction, global countermeasures, and what lies ahead.
Market Reaction: A Sudden and Severe Plunge
Leading up to the tariff announcement, markets showed slight optimism, but the news triggered a sharp selloff. Over the course of two trading days, the S&P 500 lost more than $5 trillion in market value. Major indices closed with severe losses:
- The Dow Jones Industrial Average plummeted nearly 8%.
- The S&P 500 dropped over 9%.
- The NASDAQ suffered the most, closing 10% lower.
Economists warned that the move came at a precarious time for the economy, which was already teetering due to uncertainty surrounding Trump’s economic policies and broader concerns about consumer confidence.
China Retaliates, Europe Prepares Its Response
China was swift in its response, imposing 34% reciprocal tariffs on all U.S. imports starting Friday.
“This practice of the U.S. is not in line with international trade rules, undermines China’s legitimate rights and interests, and is a typical unilateral bullying practice,” said China’s finance ministry in a strongly worded statement.
Meanwhile, the European Union is expected to approve countermeasures on up to $28 billion worth of U.S. imports. According to a Reuters report, the European Commission will propose a list of targeted U.S. products to member states, rather than adopting broad reciprocal levies. The proposed tariffs will likely affect U.S. meat, cereals, wine, wood, and clothing, as well as consumer goods like chewing gum, dental floss, vacuum cleaners, and toilet paper.
Investor Panic: Comparisons to Historic Market Crashes
Investors and analysts are increasingly concerned that the tariff-induced turmoil could mirror past financial crises. CNBC’s Jim Cramer sounded an alarm on Mad Money, warning that the market collapse could resemble the COVID-19 crash, the dot-com bust of the early 2000s, or even the infamous 1987 Black Monday, when the Dow Jones lost 22.6% in a single day.
“If the president doesn’t try to reach out and reward these countries and companies that play by the rules, then the 1987 scenario—the one where we went down three days and then down 22% on Monday—has the most cogency,” Cramer said.
One would have to imagine that President @realDonaldTrump’s phone has been ringing off the hook. The practical reality is that there is insufficient time for him to make deals before the tariffs are scheduled to take effect.
I would therefore not be surprised to wake up Monday…
— Bill Ackman (@BillAckman) April 5, 2025
Billionaire hedge fund manager Bill Ackman, a Trump supporter during the 2024 election, took to X (formerly Twitter) to suggest that delaying the tariffs might be the only way to prevent a severe recession.
“The risk of not doing so is that the massive increase in uncertainty drives the economy into a recession, potentially a severe one,” Ackman wrote.
Economic Outlook: Recession Warning from Experts
JPMorgan’s chief economist Michael Feroli issued a stark warning, predicting that Trump’s tariffs would push the economy into a recession. In a note to clients obtained by Yahoo Finance, Feroli outlined his forecast. “We now expect real GDP to contract under the weight of the tariffs,” Feroli wrote.
- Real GDP contraction of 1% in the third quarter of 2025.
- A further 0.5% GDP decline in the fourth quarter.
- Unemployment rising above 5% in the second half of the year.
Trump Administration: No Room for Negotiation
Despite growing concerns, the Trump administration has made it clear that the tariffs will be implemented without delay or negotiation.
“The tariffs are coming. He announced it and he wasn’t kidding. The tariffs are coming, of course they are,” said Commerce Secretary Howard Lutnick on CBS’s Face the Nation.
Treasury Secretary Scott Bessent echoed the sentiment on NBC’s Meet the Press, emphasizing that the tariffs were meant to correct decades of trade imbalance.
“They’ve been bad actors for a long time and it’s not the kind of thing you can negotiate away in days or weeks,” Bessent said. “After 20, 30, 40, 50 years of bad behavior, you can’t just wipe the slate clean.”
Also Read: NewsX Explainer On Market Bloodbath: How Trump’s Tariffs Are Shaking Global Markets
