The United States markets are reeling from the shock of the reciprocal tariffs announced by President Trump on April 2. The markets are reportedly going through their worst crash since Covid, with Wall Street going into a free fall for the second day straight.
The trade fight triggered by Donald Trump’s reciprocal tariffs has sparked fears of global economies going into a recession.
While the Dow Jones dropped by 5.5 per cent, the S&P 500 saw a plunge of 5.97 per cent on Friday.
The losses caused by the market plunge following Donald Trump’s ‘Liberation Day’ tariffs have been estimated around $6 trillion, according to an AFP report. The lost money mostly accounts for the investment and retirement portfolios of the American people.
President Trump, however, seems to be determined to stand by his tariffs decision, dismissing the market crash as a “great time to get rich” and adding that his policies “will never change”. In a post on his own social media platform Truth Social, Trump wrote, “To the many investors coming into the United States and investing massive amounts of money, my policies will never change. This is a great time to get rich—richer than ever before!!!” in all caps.
‘Big businesses not worried’
Trump sought to defend his decision by saying that it will “supercharge” the economy of the US and that big businesses are not worried by the tariffs. “Big business is not worried about the Tariffs, because they know they are here to stay, but they are focused on the BIG, BEAUTIFUL DEAL, which will SUPERCHARGE our Economy. Very important. Going on right now!!!” he said.
Trump’s confidence seems to stem from the belief that the tariffs will force companies to start production on the US soil rather than importing, which will help turn around the American economy and create jobs for the country’s people. That, however, seems like a long shot, at least for now.
China’s retaliation
After China retaliated against the Trump tariffs with a 34 per cent duty on the US, which will come into effect on April 10, the seemingly oblivious President said that the country had panicked. “China played it wrong, they panicked — the one thing they cannot afford to do!” he wrote.
Refusing to take what the US throws its way, China has also threatened that it will sue the United States at the World Trade Organization over its tariffs.
In another big move, China on Friday restricted export of rare earth elements such as samarium, gadolinium, terbium, dysprosium, lutetium, scandium and yttrium. The restriction on these elements, which are used in high-end medical and electronics technology, have put several US industries at risk.
The US depends heavily on China for rare-earth elements, which is the biggest exporter of such compounds. According to USGS, 70 per cent of the US imports of rare earth compounds and metals from 2020 to 2023 came from China, said a Bloomberg report.
What is recession?
The US tariffs have sent not just the American, but markets across the world in shock, posing threat of potential recession.
According to the IMF, while there is no official definition of recession, there is general recognition that the term refers to a period of decline in economic activity.
Very short periods of decline are not considered recessions. Most commentators and analysts use, as a practical definition of recession, two consecutive quarters of decline in a country’s real (inflation adjusted) gross domestic domestic product.
With agency inputs.
