President Donald Trump’s tariff policies have unsettled investors, sparking fears of an economic downturn that triggered a stock market selloff erasing $4 trillion from the S&P 500’s peak last month, when Wall Street had been rallying behind his agenda.
A wave of new Trump administration policies has heightened uncertainty for businesses, consumers, and investors, particularly the escalating tariff measures against major trading partners, including Canada, Mexico, and China.
“We’ve seen clearly a big sentiment shift,” said Ayako Yoshioka, senior investment strategist at Wealth Enhancement. “A lot of what has worked is not working now.”
The stock market downturn intensified on Monday, with the benchmark S&P 500 dropping 2.7%, marking its steepest daily decline this year. The Nasdaq Composite fell 4%, its biggest one-day loss since September 2022.
By Monday’s close, the S&P 500 had fallen 8.6% from its February 19 record high, wiping out over $4 trillion in market value and nearing a 10% drop that would signal a market correction. The tech-heavy Nasdaq has also declined more than 10% from its December peak.
Over the weekend, Trump declined to speculate on the possibility of a US recession as investors grew increasingly concerned about the effects of his trade policies.
“The amount of uncertainty that has been created by the tariff wars with regard to Canada, Mexico, and Europe is causing boards and C-suites to reconsider the pathway forward,” said Peter Orszag, CEO of Lazard, at the CERAWeek conference in Houston.
“People can understand ongoing tensions with China, but the Canada, Mexico, and Europe part is confusing. Unless that gets resolved over the next month or so, this could do real damage to the economic prospects of the US and M&A activity,” Orszag added.
Delta Air Lines on Monday cut its first-quarter profit forecast by half, sending its shares down 14% in after-hours trading. CEO Ed Bastian attributed the revision to rising economic uncertainty in the US.
Investors are also monitoring whether lawmakers can pass a funding bill to prevent a partial federal government shutdown. Meanwhile, a key US inflation report is expected on Wednesday.
“The Trump administration seems a little more accepting of the idea that they’re OK with the market falling, and they’re potentially even OK with a recession in order to exact their broader goals,” said Ross Mayfield, investment strategist at Baird. “I think that’s a big wake-up call for Wall Street.”
Faridah Abdulkadiri
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