It’s not hard to understand why stock market futures plunged so dramatically on Tuesday with the threat of new tariffs hanging over us. Customs will start collecting these tariffs starting at midnight, impacting all imports from 86 countries, including China. President Donald Trump’s recent announcement has set off a $1.5 trillion market crash. Consequently, stocks have experienced a four-day bloodbath.
In all the chaos of this historic storm, the Nasdaq Composite index has crashed over 13% already. Apple Inc. has beaten back some of the worst news ever to hit a company, driving its stock down almost 23%. This decline is the company’s worst performance of this scale since October 2000. The Dow Jones Industrial Average is currently in the midst of a staggering loss of more than 4,500 points in only four days. At the same time, the S&P 500 has fallen by 12%, even without factoring in the impact from the tariff rollout.
Investors are bracing for increased turbulence. They’re all dutifully keeping an eye on this Wednesday’s release of Federal Reserve meeting minutes. On Tuesday, stock futures reflected this anxiety. Improved hedging against inflation Nasdaq-100 futures were down 0.88%, and S&P 500 futures were 0.89% lower.
Canada has already officially decided to impose 25% retaliatory tariffs on U.S.-produced vehicles. No doubt this move was in direct response to the new duties that were just announced. This stepped-up enforcement has escalated tensions among trading partners and sparked fears of costly retaliatory economic impacts.
That volatility was no less evident inside the market on Tuesday. The S&P 500 shot up more than 4% throughout the trading day. It still ended the day down by 1.6%. The Dow rejoiced in the shallow end with a 3.9% increase. It was unable to hold onto those gains and in fact closed the day down 0.8%. These swings are yet another sign of the deep investor concern over the new tariffs and their likely effect on global trade.
“Our base case is tariffs will, over time, drift lower than today’s level but stay off the charts – at the highest levels of our lifetimes,” – Piper Sandler analyst Andy Laperriere
The market’s response to these developments highlights the interconnectedness of global economies and how quickly investor sentiment can shift in reaction to policy changes. The targeted countries are eager and able to retaliate against these punitive tariffs, adding even more volatility to an economic environment already marked with uncertainty.