US Tariff Policy Sparks Stock Market Volatility and Recession Fears

By Evans Momodu
Published 19:03

Despite a temporary pause on certain US tariffs, import taxes under Trump's trade policy continue to drive market volatility and raise recession concerns among economists and investors.

After one of the most impressive rallies in modern history, the US stock market is once again facing steep declines, underscoring the lasting impact of the Trump administration’s aggressive tariff strategy.

While President Donald Trump recently announced a 90-day suspension on some of his “reciprocal” tariffs, significant damage from existing import taxes has already been done—leaving economic recovery on uncertain footing.

On Thursday, major US indexes turned sharply negative following a White House clarification that the effective tariff rate on Chinese goods stood at 145%—a figure higher than previous estimates.

The Dow Jones Industrial Average, which surged nearly 3,000 points the day before, dropped over 1,500 points (3.7%) by midday. The S&P 500 declined by 4.5%, and the Nasdaq Composite fell by 5.2%, erasing gains from one of the best trading days since 2008.

Investor optimism had been buoyed by Trump’s temporary rollback of the widely criticised “reciprocal tariffs,” which had imposed import duties ranging from 11% to 50% on a broad set of nations. The administration’s move was seen as a gesture to encourage global trade negotiations.

Further boosting early market sentiment, the European Union announced it would suspend its retaliatory tariffs against the US, expressing a willingness to engage in new trade talks.

According to Treasury Secretary Scott Bessent, over 70 countries have expressed interest in pursuing trade deals to avoid further import taxes.

However, economists and market analysts warn that the pause may be too little, too late. Current tariff measures—including a universal 10% import tax, and 25% tariffs on automobiles, steel, aluminum, and select goods from Canada and Mexico—remain intact. Additional duties on pharmaceuticals, semiconductors, lumber, and copper are still on the agenda.

Financial institutions remain sceptical of a near-term rebound. Goldman Sachs maintained its forecast of a 50% chance of a US recession, while JPMorgan Chase held firm at 60%, despite the latest trade policy shift.

“The economic strain from these simultaneous shocks is profound,” said Joe Brusuelas, Chief Economist at RSM. “Delaying certain tariffs won’t prevent the likely downturn—it just postpones the inevitable.”

Currency markets reflected investor anxiety as the US Dollar Index fell by 1.8% Thursday morning, reaching its lowest level since October. The dollar’s year-to-date decline signals a broader lack of confidence in US economic stability.

Meanwhile, inflation data released Thursday showed a slowdown in March, but analysts say this offers little reassurance given the overshadowing trade concerns. “The inflation figures are backward-looking,” noted Skyler Weinand, Chief Investment Officer at Regan Capital. “The real focus is on how the evolving tariff landscape will impact future pricing and consumer behaviour.”
Source: CNN