Stocks Drop in US and Asia Amid Concerns Over Trump Tariffs

Stock markets in the United States tumbled dramatically on Monday on concerns about the detrimental economic impact of President Donald Trump's tariffs.  In Asia, losses observed early in Tuesday trading were pared by the afternoon.

 

It came after the president stated in a television interview that the world's largest economy was in a "period of transition" when asked about the possibility of a recession.

 

Since those statements were televised on Sunday, top Trump officials and advisers have attempted to allay market concerns.

 

"The previous notion of Trump as a stock market president is being re-evaluated," said Charu Chanana, an investment strategist at investment bank Saxo, to the BBC.

In a Fox News interview broadcast over the weekend but filmed on Thursday, Trump appeared to address economic concerns.  "I hate to predict things like that," he told me.  "There is a transition period because what we're doing is so large.  We are returning prosperity to America.  That's a significant deal.

 

On Tuesday afternoon, Japan's Nikkei 225 was down 1.1%, South Korea's Kospi was down 1.2%, and Hong Kong's Hang Seng Index fell 0.8%.

 

On Monday in New York, the S&P 500, which measures the most prominent American corporations, closed 2.7% lower, while the Dow Jones Industrial Average fell 2%.

The tech-heavy Nasdaq was hammered incredibly severely, falling 4%.

 

Tesla stock plunged 15.4%, while Nvidia, the world's most considerable artificial intelligence (AI) chipmaker, fell more than 5%.  Other large tech stocks, including Meta, Amazon, and Alphabet, dropped dramatically.

 

"Trump is keeping political leaders guessing about his next tariff moves, but the problem is that he's also keeping investors guessing, which is reflected in the negative market mood," said Tim Waterer, chief market analyst at financial services firm KCM Trade.

 

"Whilst recession talk may be premature, the mere prospect of this coming to fruition is enough to put traders into a defensive mindset."

After the market closed on Monday, a White House official told reporters: "We're seeing a strong divergence between [the] animal spirits of the stock market and what we're seeing unfold from businesses and business leaders."

 

"The latter is more meaningful than the former on what's in store for the economy in the medium to long term," according to the source.

 

Later in the day, White House spokesperson Kush Desai said "industry leaders" have responded to Trump's agenda, including tariffs, "with trillions of dollars in investment commitments."

Last week, the leading US markets returned to the level observed before Trump's election victory in November, which investors had first applauded due to promises of tax cuts and reduced regulation.

 

Investors are concerned that Trump's tariffs, which are charges imposed on goods as they enter the nation, will raise costs and slow growth in the world's largest economy.

 

"The level of tariffs that Trump is imposing, I think no doubt, will have to cause inflation somewhere down the line," Rachel Winter, investment manager at Killik & Co, told Today.

 

The president announced the steps after blaming China, Mexico, and Canada for not doing enough to stop the flow of illegal drugs and people into the United States. 

According to economist Mohamed El-Erian, investors were initially enthused about Trump's pledges for deregulation and lower taxes but underestimated the risk of a trade war.

 

He claimed the recent stock market declines, which began last week, indicate the correction of those bets.

 

"It's a complete change in what the market expected," he continued, stressing that investors are also responding to evidence that firms and households are beginning to hold back on spending due to uncertainty, which might harm economic development.

But President Trump's economic adviser, Kevin Hassett, has pushed back against those who predict a dismal future.

 

In an interview with CNBC, Hassett stated thmerous reasons to be hopeful about the US economy and that tariffs imposed on Canada, Mexico, and China were already driving manufacturing and jobs to the US.

 

"There are many reasons to be extremely bullish about the economy going forward," he told reporters.

 

He agreed that there were some "blips in the data" for this quarter, which he blamed on the timing of Trump's tariffs and the "Biden inheritance."