U.S. President Donald Trump’s plan to impose tariffs on countries worldwide has triggered turmoil in global markets.
Even within the United States, many shareholders are bracing for volatility, expecting stock prices to drop. Trump warned foreign governments they would have to pay “a lot of money” to lift the tariffs, which he described as “medicine.”
Stock markets across Asia plunged sharply, while in Europe, they dropped to their lowest levels in 18 months.
What Are Stocks?
Stocks represent small ownership shares in a company. When someone buys a stock, they essentially own a piece of that company. Stock traders hope companies grow over time, increasing the value of their shares and allowing them to earn profits. Stocks are typically bought and sold on exchanges like the New York Stock Exchange.
Meanwhile, oil prices also fell, with investors fearing that Trump’s newly announced tariffs could drive up costs, lower demand, and potentially trigger a global recession.
What Is a Recession?
According to the U.S. National Bureau of Economic Research, a recession is a significant decline in economic activity spread across the economy, lasting more than a few months. During a recession, consumer spending drops, companies sell fewer products, profits shrink, and job losses rise — creating a vicious cycle.
European Union ministers, who have struggled to agree on a response that would avoid further harm to businesses and consumers, are scheduled to meet Monday to form a united stance.
Goldman Sachs, one of the world’s largest investment banks, based in New York City, has increased the likelihood of a U.S. recession within the next 12 months to 45%.
Other major investment banks have also revised their forecasts. Economists at JPMorgan, who previously predicted a 1.3% growth in U.S. GDP, now expect a 0.3% contraction due to the tariffs.
What Is Gross Domestic Product (GDP)?
According to the International Monetary Fund (IMF), GDP measures the monetary value of all goods and services produced in a country within a specific period. A growing GDP indicates a healthy economy, while a shrinking GDP signals economic decline, crisis, or recession.
Robert Pavlik, a senior manager at Dakota Wealth Management, a U.S. firm serving high-net-worth clients, told Reuters that many fear “the worst is yet to come.”
“They are worried about what happens next — a domestic recession followed by a global one, potentially leading to a depression,” Pavlik said.
As American markets brace for impact, Trump shows no signs of backing down. He continues to criticize China for retaliatory tariffs and urges the U.S. Federal Reserve to lower interest rates.
Trump believes lowering interest rates could help prevent a recession by stimulating the economy, boosting demand for goods and services, and making loans cheaper.
On Monday, U.S. stock indicators fell sharply. The S&P 500 was on the verge of confirming a prolonged bear market — something not seen since the 2008 global financial crisis and the COVID-19 pandemic outbreak.
What Are the S&P 500 and U.S. Stock Indicators?
The S&P 500, widely used as a benchmark for the overall U.S. stock market, tracks the performance of 500 of the largest listed companies, including Apple, Microsoft, Amazon, Tesla, and Google. Many investors prefer putting their money in such indices to benefit from overall market growth rather than picking individual stocks.
U.S. stock indicators also include futures contracts, allowing investors to buy or sell a stock index like the S&P 500 at a set price on a future date. If investors expect prices to rise, they buy a contract to sell later at a profit; if they expect a fall, they sell now and repurchase cheaper later.
Trump’s tariff announcement sparked widespread criticism and led China, the world’s second-largest economy, to announce retaliatory tariffs, escalating tensions further.
