Trump tariffs and recession worries hit US markets, knocking away $4 trillion in value

President Donald Trump’s tariffs have alarmed investors, with worries of an economic slump fueling a stock market sell-off that has erased USD 4 trillion off the S&P 500’s top last month, when Wall Street praised most of Trump’s program.

A bombardment of new Trump initiatives has exacerbated uncertainty for firms, consumers, and investors, particularly the back-and-forth tariff actions against key trade partners such as Canada, Mexico, and China. “We’ve seen a big sentiment shift,” said Ayako Yoshioka, Wealth Enhancement’s senior investment strategist. “A lot of what has worked is not working now.” On Monday, the stock market fell even more. The benchmark S&P 500 plummeted 2.7%, the most significant daily decline of the year. The Nasdaq Composite fell 4%, the worst one-day drop since September 2022.

The S&P 500 finished down 8.6 percent on Monday from its February 19 record high, losing more than USD 4 trillion in market value since then and approaching a 10% fall, which would indicate a correction for the index. The tech-heavy Nasdaq closed down more than 10% from its December peak on Thursday.

Over the weekend, Trump declined to forecast whether the United States will enter a recession as investors fretted about the implications of his trade strategy. “The amount of uncertainty created by tariff wars in Canada, Mexico, and Europe is causing boards and C-suites to reconsider the path forward,” said Peter Orszag, CEO of Lazard, addressing at the CERAWeek conference in Houston.

“People understand the ongoing difficulties with China, but the bit about Canada, Mexico, and Europe is perplexing. Unless it is resolved within the next month, this might seriously impact the US economy and M&A activity,” Orszag added. Delta Air Lines (DAL.N) cut its first-quarter profit forecast by half on Monday, sending its shares down 14% in afternoon trading. CEO Ed Bastian cited increased US economic uncertainty.

Investors are particularly interested in whether Congress can pass a financing package to avoid a partial federal government shutdown. On Wednesday, the United States will release its inflation data. “The Trump administration appears to be a little more accepting of the idea that they’re okay with the market falling, and possibly even OK with a recession, to achieve their larger goals,” said Ross Mayfield, an investment strategist at Baird. “I think that’s a big wake-up call for Wall Street.”

According to Federal Reserve Bank of St. Louis data as of July 2024, the percentage of total corporate equities and mutual fund shares owned by the bottom half of the US population, ranked by wealth, is approximately 1%, while the same measure for the top ten percent of the population, ranked by wealth, is 87%. The S&P 500 gained more than 20% in 2023 and 2024, powered by mega-cap technology and tech-related firms such as Nvidia and Tesla, which suffered in 2025 and dragged key indexes down.

On Monday, the S&P 500’s technology sector sank 4.3%, while Apple (AAPL.O) and Nvidia slumped around 5%. Tesla fell 15%, erasing over USD 125 billion in value. Other risk assets were also penalized, with bitcoin down 5%. Some defensive parts of the market fared better, with the utility sector posting a 1% daily gain. Safe-haven US government paper witnessed increased demand, with benchmark 10-year Treasury rates moving inversely with prices, falling to around 4.22 percent.