Market Plunge: Trump Tariffs Trigger Wall Street’s Worst Week Since Pandemic, Recession Fears Rise

Recent policy announcements regarding global trade have sent shockwaves through financial markets, culminating in Wall Street’s most challenging week since the early days of the pandemic crisis. Investor confidence eroded rapidly following President Donald Trump’s introduction of widespread tariffs, leading to significant downturns across major indices.

Market Plunge Driven by Tariff Concerns

The sell-off gathered momentum midweek and persisted through Friday’s close. The Dow Jones Industrial Average (DIA) experienced a sharp decline, falling 9.3% over just two trading sessions and officially entering correction territory. Similarly, the S&P 500 (SPY) recorded its worst weekly performance since March 2020, dropping 9.1%.

This substantial downturn pushed the S&P 500 significantly closer to a bear market. Finishing the week at 5,074 points, the index stood 17% below its recent highs, nearing the commonly recognized threshold for bear market status. President Trump underscored his commitment to the new trade measures, stating emphatically online, “MY POLICIES WILL NEVER CHANGE,” dampening hopes for a quick reversal.

Details of the New Tariffs

The newly announced tariff structure is set to take effect shortly, imposing a baseline 10% duty on imports from all nations. Further increases are scheduled for specific regions starting April 9th.

Region/Country	Additional Tariff Rate (from April 9th)
China	34%
European Union	20%
Japan	24%

Retaliation has been swift. China plans to impose a 34% tariff on U.S. goods starting April 10th, while Canada has announced a 25% retaliatory tariff on automobiles. Despite this environment, some stocks, like General Motors (GM), remained positive year-to-date, though GM itself saw a recent pullback of 3.75%.

Heightened Recession Fears

The escalating trade tensions have amplified analyst concerns about a potential recession. Keith Lerner, Chief Market Strategist at Truist Advisory Services, noted that historically, market corrections exceeding 10% are usually followed by recovery within a year. However, he pointed out that the exceptions often coincided with recessions.

Prior to the tariff announcements, recession odds were considered moderate. Bloomberg surveys in late March placed the probability of a recession within the next 12 months at 30%, up from 20% earlier in the year. These odds are expected to climb further. JPMorgan Chase economists took a more pessimistic stance, raising their recession probability estimate to 60%. They argued the cumulative effect of the tariffs represents a significant tax increase, drawing parallels to conditions preceding the 1969-70 recession. Their report starkly warned, “There will be blood.”

Market Sentiment and Potential Rebound

Current market levels may already reflect significant pessimism. Lerner suggests that the market’s decline implies roughly a 70% perceived probability of recession, considering the typical 24% drop seen during past recessions.

However, signs of panic could paradoxically signal that a market bottom is approaching. The VIX volatility index surged above 45 on Friday, significantly higher than its usual levels. Additionally, the ratio of put options (bets on price declines) to call options (bets on price increases) reached a one-year peak.

“What that means is you start to see some fear work its way into the market. I’m not saying this is the low, but markets tend to bottom on fear.”

Keith Lerner, Chief Market Strategist at Truist Advisory Services.

Lerner anticipates a volatile, two-way market in the near term.

“You have risk that the market goes lower, but any signs of progress on the trade front could lead to a technical bounce.”

Investors are keenly watching for any positive signals. For instance, positive remarks from President Trump regarding Vietnam led to a rally in Nike (NKE) shares, as the company relies heavily on Vietnamese manufacturing. As markets hover near bear territory, many are hoping for similar catalysts to emerge, hinging largely on future policy decisions.