US stock markets plunged sharply on Monday following a declaration of reciprocal tariffs by former President Donald Trump, which caused a global market meltdown. Wall Street also joined the trend, with the Dow Jones Industrial Average dropping by 1,200 points and the Nasdaq Composite dropping 4%, the Associated Press reported.
The S&P 500 dropped 3.8% in early trading, marking its worst performance since the COVID-19 market crash in March 2020. The downturn followed a week of market volatility and added pressure to an already weakening global economy.
$5 Trillion Erased from US Stocks
Markets have been inching toward bear territory since April 2. In two days after Trump made the tariff declaration, the cumulative value of all stocks in the US fell below more than $5 trillion. The broad declines mirror investor angst about the sustained economic implications of the new trade policy.
Japan’s Nikkei index dropped almost 8%, while European markets fell by 6%. Meanwhile, the VIX volatility index surged to its highest levels since August 2024, signaling increased fear and uncertainty in the financial markets.
US recession fears heighten
Investors are increasingly worried that the tariff policy may push the U.S. economy into a recession. Quoting Reuters sources, analysts now feel the Federal Reserve will hold talks on cutting interest rates as soon as May to stabilize the economy.
Praveen John, investment firm Paleo Leon’s managing director, cautioned of increasing concern among investors. He said to Reuters, “Fear and uncertainty have increased. People can say that this is good in the long run and that may be. But in the short run there’s a lot of pain.”
He went on to say, “What’s the end game? Is China going to fold? Is Europe going to fold or is Trump going to fold? At this point its not yet clear anybody is willing to back off.”
Trump Defends Tariffs Amid Market Panic
In spite of the broad sell-off, Trump stood by his tariff policy in a post on TruthSocial. He posted, “The United States has an opportunity to do something that should have been done DECADES AGO. Don’t be Weak! Don’t be Stupid! Don’t be a PANICAN (A new party based on Weak and Stupid people!). Be Strong, Courageous, and Patient, and GREATNESS will be the result!”
Trump’s reaction seemed to be in an effort to reassure base and instill optimism in the eventual effect of the policy change. But with markets in free-fall and fears of recession escalating, investors continue to be guarded about what’s next.