U.S. stocks sank Monday as the financial turmoil that began last week following President Donald Trump's shock tariffs announcement continue to rip through markets.
The S&P 500 opened down 4%, entering "bear market" territory as it officially fell to below 20% from its most recent high. The tech-heavy Nasdaq declined more than 4.5%. The Dow Jones Industrial Average lost 3.78% or 1,200 points.
The hammer blow of President Donald Trump's tariffs reverberated around the world overnight across the major indexes in Europe and Asia, where markets opened to a bloodbath and automatic circuit breakers triggered in some places to stop stocks crashing.
Even the price of bitcoin, which showed signs Friday of having resisted the wider market downturn, fell as much as 1.2%. Over the weekend, it fell more than 7%.
The main U.S. benchmark for crude oil fell to its lowest price since April 2021, before slightly bouncing back and wavering at around $63 a barrel.
The convulsions in financial markets have not been a response to the imposition of tariffs — most presidential administrations have enacted them in one form or another — but rather to the scale of what the Trump administration has proposed.
Rather than simply taxing imports, Trump has sought to upend an entire economic order premised on free trade and the U.S. transition to a service-oriented economy from a manufacturing-intensive one.
The cost to the U.S. of switching back to being a manufacturing-based, export-oriented economy is virtually incalculable, since it would also likely entail a relatively lower standard of living for the majority of U.S. residents for an indefinite period of time as wages declined in order to be competitive with the rest of the world.
Trump continued to signal little intention to back off his proposals Monday.
In a social media post this morning, he sought to portray his strategy as a success, pointing to falling oil and food prices and declining interest rates while claiming, inaccurately, that "there is NO INFLATION," and calling for the Federal Reserve to to cut rates.
He also continued to hit out at China for "taking advantage" of the U.S.
"Our past 'leaders' are to blame for allowing this, and so much else, to happen to our country," he wrote.
In fact, the declines in prices Trump mentioned have largely been a function of weakening economic growth.
While there were signs of slower activity as the Biden administration wound down, the uncertain business environment Trump has created with his chaotic tariffs rollout has helped to curtail consumer and business sentiment, while overall price growth has continued to linger.
As a result of that stubborn inflation, consumer borrowing rates have actually changed little — contradicting Trump's assertion. And while government borrowing rates have shown more substantial declines, those too are the result of investors seeking safe-haven assets amid the prospect of slower growth.
Asked about the market plunge late Sunday aboard Air Force One, Trump said that it was sometimes necessary to "take medicine" and that he was not purposely engineering a market sell-off — contradicting a TikTok message he posted and then re-posted over the weekend.
In a release Sunday, the White House published a brief note outlining Trump’s plan to end “the globalist policies of economic destruction that have shipped American jobs and industries overseas at the expense of American workers.”
Trump's baseline 10% tariffs took effect Saturday, with dozens of countries facing higher so-called reciprocal tariffs beginning Wednesday. China said Friday it would impose a 34% tariff on all goods imported from the United States beginning this Thursday, after the U.S. tariffs are set to rise on Chinese goods — from 20% to at least 54%.
Goldman Sachs analysts wrote over the weekend that the "tariff Pandora's box has been opened," adding that the U.S. action against China in particular was "substantially higher than our economists’ previous base case and most investors had expected."
While Trump's Cabinet has been aligned behind him, the overwhelming consensus among economists and high-profile business executives has been that the tariffs are a mistake.
One surprising source of criticism was Elon Musk, who hit out Saturday at the White House senior adviser for trade and manufacturing, Peter Navarro. Navarro shot back in an interview Sunday that Musk was "simply protecting his own interests."
But it's not clear that Musk's interests are particularly different from those of any of the many businesses that rely on the modern global economic system and its cross-border supply chains. Tesla, alongside SpaceX, last month submitted a letter warning the U.S. trade representative of the impact of tariffs and the threat of retaliatory ones to its bottom line.
Trump declined to criticize Musk on Sunday when a reporter asked him about Musk's call for zero tariffs between the United States and Europe.
Ahead of the futures open Sunday evening, Dan Ives, managing director at Wedbush Securities financial group, cut his price forecasts for Tesla's stock by 43% and for Apple's by 23%.
“The economic pain that will be brought by these tariffs are hard to describe and can essentially take the U.S. tech industry back a decade in the process while China steamrolls ahead,” he wrote.
Hedge fund investor Bill Ackman, an ardent supporter of Trump’s 2024 campaign, posted on X that if the president stays his current course, “we are heading for a self-induced, economic nuclear winter, and we should start hunkering down.”
In the meantime, at least one banking giant is already forecasting that unemployment is poised to climb from 4.2% to 5.3% and for the economy to contract.
JPMorgan analysts wrote to clients Friday that “the pinch from higher prices that we expect in coming months may hit harder than in the post-pandemic inflation spike.”
Early Monday, JPMorgan CEO Jamie Dimon released his annual letter to shareholders and called on the tariffs impasse to be resolved quickly while warning about the overall inflationary environment in the economy.
“Whatever you think of the legitimate reasons for the newly announced tariffs — and, of course, there are some — or the long-term effect, good or bad, there are likely to be important short-term effects,” Dimon said. “We are likely to see inflationary outcomes, not only on imported goods but on domestic prices, as input costs rise and demand increases on domestic products.”
