The stock market experienced significant volatility and losses Tuesday as investors grappled with the impact of President Donald Trump’s tariffs on the global economy. The Dow fell 320 points, or 0.84%, while the S&P 500 fell 1.57% and the tech-heavy Nasdaq Composite slid 2.15%. The market briefly rallied in the morning on hopes of trade negotiations, with the S&P 500 and Nasdaq surging as much as 4% and 4.5%, respectively.
However, the gains evaporated midday when White House Press Secretary Karoline Leavitt announced that Trump would impose an additional 25% in levies across all Chinese imports on Wednesday, bringing the total tariff to at least 30% on all goods from China. “We’re not anywhere out of the woods yet, and so that sort of tempers things,” said Thomas Martin, senior portfolio manager at Globalt Investments. Wall Street’s fear gauge, the VIX index, surged higher Tuesday, reflecting “extreme fear” among traders.
Over the past few days, stocks have been hammered as investors grew fearful that Trump’s tariff policy would plunge the US into a recession.
Market volatility fueled by tariffs
Some investors saw buying opportunities after the selloff, with the price-to-earnings ratio of S&P 500 companies closing below 17 Monday, historically cheap levels.
“This is a very normal action and very technical in nature after a shock period,” said Truist’s Keith Lerner. “The market is extremely oversold, and markets don’t move in a linear fashion.”
The White House said it is managing “a massive number of requests for negotiations” from nations and prioritizing talks with Japan and South Korea. The European Union also said it is discussing buying more US liquefied natural gas in response to Trump’s trade deficit concerns.
However, US Trade Representative Jamieson Greer reaffirmed that Trump’s massive reciprocal tariffs will go into effect Wednesday. China’s Commerce Ministry said the country would “stand up to Trump,” escalating the trade war between the two largest economies. Recession fears persist, with multiple Wall Street banks warning that any escalation of the trade war would likely lead to a US and global recession this year.
Although some in the Trump administration were declaring victory, others warned that the tariffs would raise prices, slow the global economy, and weaken America’s standing in the world by straining its alliances.
