In a surprise move, US President Donald Trump announced the imposition of new tariffs on foreign imports, casting a shadow of anxiety on financial markets. US market futures fell sharply following these decisions, which analysts described as potentially leading to a full-scale trade war. Negative expectations about a global recession resulting from these tariffs drove the decline in global markets.
At 6:00 AM EST, Dow Jones futures fell 1,090 points, or 2.6%. S&P 500 futures also fell 185 points, or 3.3%, while Nasdaq 100 futures fell 705 points, or 3.6%. These figures reflect the tense situation created by Trump’s decision in US markets, raising questions about the impact of the tariffs on the domestic and international economy.
Trump’s Tariffs: Tougher Than Expected
On Wednesday, Trump announced a comprehensive 10% tariff on US imports. The US administration also announced much higher rates on some countries it classifies as “bad actors.” An additional 34% tariff was imposed on China, in addition to the previously imposed 20% tariff. Tariff rates ranging from 20% to 49% were also applied to the European Union, Japan, and other countries.
These tariffs will take effect on April 5, with country-specific increases beginning on April 9.
Trump justified this measure by expressing a desire to combat unfair trade practices and currency manipulation, emphasizing that these actions aim to rejuvenate US industries and reduce the national debt.
President Trump’s tariffs on US imports caused a sharp decline in financial markets and raised concerns about the global economic outlook. This decision was more stringent than expected, and experts predicted it would lead to an economic contraction in the United States and globally.
Analysts’ Views on the Impact of Tariffs on the US Economy
Analysts at Barclays explained that Trump’s decision to impose tariffs was more severe than expected, especially for Europe and China. They added that the increased tariffs, coupled with ongoing uncertainty, could increase the likelihood of an economic recession in the near future. They noted that the impact of the tariffs on US markets could be significantly detrimental, as they are expected to lead to a decline in US economic growth.
Carl Weinberg, chief economist at High Frequency Economics, also noted in a note that these policies could lead to a 10% decline in US GDP in the second quarter of 2025. This decline could push the world’s largest economy into recession after a slight contraction expected in the first quarter.
The Impact of Tariffs on Major Companies
Large US companies were not immune to the repercussions of the tariffs. Apple shares fell sharply, falling 7%, reflecting the significant impact these tariffs have had on companies that rely heavily on production in China. An analysis by Jefferies predicts that tariffs imposed on Chinese imports will significantly impact Apple’s profitability, potentially reducing its earnings by 14% in fiscal year 2025 if the company does not receive a waiver.
The negative impacts affected not only Apple but also other companies like Five Below, Dollar Tree, and Gap, whose shares saw significant declines before the start of trading. Shares of major retailers like Nike and Walmart also fell after the government imposed tariffs on major manufacturing centers in China, Vietnam, and Indonesia.
While the US administration seeks to revitalize American industries and reduce the national debt, markets and major companies face significant challenges in confronting these policies. In these circumstances, it remains difficult to determine the future direction of the economy.
Oil Market Reaction: Crude Oil Prices Drop Sharply
Trump’s tariff announcement led to a sharp decline in crude oil prices, with Brent crude futures falling 4.1% to $71.86 a barrel, and US West Texas Intermediate crude futures falling 4.3% to $68.61 a barrel. This decline is due to concerns that the tariffs will impact global economic growth, leading to a decline in fuel demand.
Unemployment Data and Jobless Claims
Regarding the US labor market, private sector payrolls surprised everyone with their strong performance, while private sector job openings data were weak earlier in the week. However, the impact of these tariffs could shape the Federal Reserve’s monetary policy, as the central bank faces a challenge in deciding whether to cut interest rates.
Federal Reserve Governor Adriana Kogler noted that there are “upside risks” to inflation as a result of Trump’s trade policy changes. She added that these tariffs could weaken economic growth in the short term and increase market volatility, which will prompt the Federal Reserve to significantly cut interest rates later this year.
The Future of Economic Policy Under Tariffs
With the tariffs taking effect, it remains to be seen how they will impact the US and global economy in the long term. While Trump is counting on these tariffs to boost US industries and reduce the national debt, economists warn that these measures could lead to unforeseen consequences, including an economic recession that could significantly impact global markets.
The biggest challenge facing the US administration is how to balance supporting the national economy and protecting economic interests amid risks that could threaten global economic stability. With the ongoing uncertainty, markets are likely to remain under intense pressure in the coming weeks, especially in light of the rising trade tensions between the United States and major powers.
