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Recently, US stock-index futures and Asian shares experienced significant declines following the Trump administration’s decision to maintain extensive tariffs despite concerns over potential global economic recession. Futures contracts for the blue-chip S&P 500 fell by 4%, while those for the tech-heavy Nasdaq 100 dropped by 5%. The typically light trading during the early morning hours in Asia can exacerbate market volatility. In Japan, the Topix index decreased by 6.8%, with the Nikkei 225 also reporting a 6.5% drop shortly after opening. Additionally, Australia’s S&P/ASX 200 and Korea’s Kospi indices both saw decreases of over 4%.
These declines occurred after more than $5 trillion was wiped from the S&P 500 over the previous Thursday and Friday, marking the worst week since the start of the pandemic in 2020. The global economic outlook has been further troubled by Donald Trump’s implementation of substantial tariffs on US imports. China responded with retaliatory duties of 34% announced on Friday.
Commodities were also hit hard; West Texas Intermediate, a US benchmark, fell by 3.4% to $59.90 per barrel—a price below the break-even point for most shale producers. The international benchmark Brent also declined by 3.4% to $63.35. Copper, considered an economic indicator due to its industrial applications, dropped over 5% to $4.14 per pound in US trading.
Trump showed no intention of backing down from his tariff strategy, stating on Truth Social that the situation calls for tariffs to address the US’s financial deficits with China, the European Union, and other regions, noting that they are beneficial by generating significant revenue for the US.
When questioned about the market downturns, Trump remarked that “sometimes you have to take medicine to fix something.” Treasury Secretary Scott Bessent downplayed the “short-term” market reactions during an NBC interview and stressed that the White House would remain steadfast. Bessent suggested that the tariffs were a response to how trading partners have treated the US and hinted they might be negotiable depending on credible offers from other countries.
Meanwhile, Federal Reserve Chair Jay Powell cautioned that the tariffs could lead to “higher inflation and slower growth.” Economists from JPMorgan revised their forecast for the US economy, anticipating a contraction of 0.3% due to the impact of tariffs, a shift from their previous expectation of 1.3% growth.
There is concern among investors that stocks will continue to decline unless Trump signals a less aggressive stance on tariffs. Activist investor Bill Ackman urged Trump to pause the tariff strategy, highlighting the potential damage to the US’s credibility as a trading partner and investment market. He warned of a potential “economic nuclear winter” if current policies persist.
Dec Mullarkey, managing director at SLC Management, commented that uncertainty is prevailing and that peak policy uncertainty may not yet have been reached. Banks and technology stocks were hit hard last week as the US dollar depreciated against major currencies and Treasury yields fell, driven by investors seeking safe-haven assets.
European and Asian equities also experienced substantial declines, and commodities like copper and oil fell in response to fears of a global trade conflict. The week concluded with significant investor withdrawals, marking the fifth-largest session of “active net reductions” since 2010, according to Morgan Stanley, with equity long-short funds accounting for 80% of the sales.
The S&P 500’s more than 10% drop over Thursday and Friday marked only the fourth time in the past 85 years that the index had experienced such a steep, rapid decline, following previous instances in 1987, during the financial crisis in 2008, and early in 2020, as noted by Deutsche Bank.
