Wall Street crashes under tariff pressure; US markets lead global meltdown

Fed Chair Jerome Powell in an address on April 4 said that he expects President Donald Trump’s tariffs to raise inflation and lower growth but added that they are well positioned to wait for greater clarity before considering any adjustments to their policy stance. "It is too soon to say what will be the appropriate path for monetary policy,” he said.

Fears of an escalating tariff war continued to rattle global markets for the second consecutive day, with US stocks taking the biggest hit after China announced retaliatory measures. Over the last two trading sessions (April 3 and April 4), US benchmark indices have plunged, with the tech-heavy Nasdaq 100 leading the decline, dropping nearly 10 percent. The S&P 500 followed with an 8 percent fall, while the Dow Jones slipped 7 percent. On April 3 alone, the S&P 500 saw $2 trillion in market value erased.

The Nasdaq Composite also edged closer to bear territory, tumbling nearly 21 percent from its December 16, 2024, high of 20,204.58.

US tech stocks bore the brunt of the sell-off on April 4, with the "Mag 7" seeing the sharpest declines. Shares of tech giants like Apple and NVIDIA have plunged nearly 13 percent each over the last two sessions.

What has been driving the market fall?

Global markets remain on edge after US President Donald Trump announced broad-based tariffs on countries exporting to the US. Fears of further escalation have intensified, with Trump unwilling to back down and other nations responding with countermeasures.

On April 4, China announced plans to retaliate with additional 34 percent tariffs on US goods starting April 10. It also imposed restrictions on about 30 US organizations and limited exports of certain rare earths, effective immediately. This comes as the US levied an additional 34 percent in tariffs on top of the 20 percent announced earlier this year.

The EU and Canada have also signaled plans to counter the US tariffs. In an April 3 address, EU President Ursula von der Leyen called Trump’s move "a major blow to the world economy," stating that while the EU is open to talks, it is finalizing an initial package of countermeasures against US steel tariffs and preparing further responses if negotiations fail.

Meanwhile, Trump has indicated that tariffs on pharmaceutical and semiconductor imports could be next.

How have other markets performed?

Amongst other markets, European markets were also not far behind the US in terms of impact as they continued to see selling for the second day. Over the last two sessions, the DAX (Germany), CAC (France) and FTSE 100 (UK), fell around 6 percent each.

While Asian markets saw selling, they fared slightly better than their European and American counterparts. Japan's Nikkei fell around 2.3 percent over the last two sessions, followed by Kospi and Hand Seng, which fell around 1.5 percent each. Indian benchmark indices, Sensex and Nifty, fell around 2 percent each.

Tariff war raising recession concerns

Amid escalating trade tensions, global brokerages have revised their recession forecasts. JP Morgan has increased its estimate of a US recession probability to 60 percent, up from 40 percent. In its report, the firm noted that US trade policy has become less business-friendly than anticipated, with potential ripple effects from global retaliation and supply chain disruptions.

Federal Reserve Chair Jerome Powell, in an April 4 address, acknowledged that President Donald Trump’s tariffs could push inflation higher and slow economic growth. However, he emphasized that the Fed is in a position to wait for more clarity before making any policy adjustments. "It is too soon to say what will be the appropriate path for monetary policy," Powell said.

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