How Tariffs Are Shaking the Stock Market
This week, the US stock market has seen its biggest drop in years. Partially due to President Trump’s announcement of tariffs, the stock market has seen a turbulent week.
Tariffs are a tax levied on imports or exports. The purpose of tariffs is to make international goods more expensive to boost domestic manufacturing and spending.
Another purpose of tariffs is to influence world policy and relations with other countries. The US recently announced tariffs that would focus on imports.
Below is the timeline of President Trump’s tariffs, the possible impact on consumers, and how these actions have affected the stock market and overall economic outlook.
Timeline of Tariff Announcements
On April 2nd, known as “Liberation Day” in the US, President Trump announced tariffs to protect American products, promote fairer trade, and end US trade imbalances.
The US imposed tariffs on Mexico, Canada, and China on February 1, and followed this with a 25% tariff on steel and aluminum on March 12.
On April 5, a 10% baseline tariff was introduced. This is a 10% tax on all imports to the US with higher rates for countries with trade deficits.
Since then, the US has imposed tariffs as high as 145% on some Chinese goods, with reasons for this being cited as unfair trade practices and intellectual property theft. You can find the full list of US proposed tariffs here.
China had retaliated with 125% tariffs on US goods.
Technology and Retail Among the Hardest Hit
The technology industry is being hit hard by this, as seen by the drop in stock price of Nvidia, an American semiconductor company. Electronics and semiconductor manufacturing are reliant on Chinese manufacturing and some of their rare earth materials.
Apple and Dell, along with Nvidia are facing increased costs for them and for their consumers.
In the retail sector, many clothing brands are being affected by higher import costs. Shein and Temu, affordable Chinese brands that have many customers in the US, are facing tariffs for the first time, making consumers worried about rising prices. Along with technology and retail, many other sectors are facing supply chain issues and increased costs.
What Does This Mean for Consumers?
For one, it could mean higher prices. Companies could decide to pass the cost of tariffs onto their customers, meaning that goods subject to a 20% tariff could become 20% more expensive.
It could also mean limited choices as companies decided to pull away from the US to avoid the tariff cost. Both could cause increased economic strain for families.
Investor Anxiety and Market Reactions
Tariffs cause uncertainty which causes changes in stock prices and investors react to the potential impacts of their investments. Especially in sectors that are highly affected by the tariffs, investors may worry about recessions or inflation causing them to sell stock, meaning the price is going down.
On April 7, two days after the tariffs went into effect, the DOW dropped 2200 points. The DOW (Dow Jones Industrial Average) is a tracker that tracks 30 prominent blue-chip companies that are leaders in their industries and is used as a way to see the US economy’s health.
Bear Market Fears Take Hold
Since that drop, described by some as a crash, the Nasdaq and S&P 500, an index that focuses on technology and growth companies and an index that tracks 500 of the largest publicly traded companies respectively, have entered a bear market.
A bear market is categorized by a prolonged decline in stock of at least 20%, pessimistic investor sentiment and a slowing economy.
However, on April 11, the S&P 500 gained 0.79%, and on April 14, the DOW gained 0.78%, meaning that markets may be stabilizing.
Looking Ahead
While the tariffs and resulting market fluctuations have caused widespread uncertainty, recent signs of stabilization suggest a cautiously optimistic path forwards for both investors and consumers alike.
