Financial markets grappled with uncertainty as investors prepared for President Donald Trump's announcement of his "Liberation Day" tariffs, set to be unveiled on Wednesday. These aggressive trade duties, targeting most U.S. trading partners, promise to usher in a new phase of economic volatility.
Monday morning opened with a wave of losses across major indexes. However, opportunistic buying helped recover some ground. By midday, the S&P 500 had trimmed its earlier 1.3% decline to just 0.2%. The Dow Jones Industrial Average managed to reverse initial losses, climbing 0.4%, while the Nasdaq remained 1% down, reflecting concerns in the tech sector.
Among Dow-listed companies, biotech giant Amgen, IBM, Coca-Cola, Walmart, and Verizon were the standout gainers, while Nvidia, Amazon, Microsoft, Salesforce, and Boeing dragged on performance.
Trump's planned tariffs, described as "heavily punitive," have sparked alarm among economists and business leaders alike. Reports suggest the president aims to levy duties on virtually all countries, an unprecedented move in modern U.S. trade policy. Speaking aboard Air Force One on Sunday, Trump confirmed, “The tariffs will start with all countries,” sending ripples through global markets.
This announcement followed a rough week for U.S. stocks, which endured their second-worst trading day of the year on Friday. Investors were already rattled by troubling inflation data, faltering consumer confidence, and signs of a slowdown in artificial intelligence investments. Trump's trade duties now add to a growing list of challenges threatening economic stability.
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Analysts at Goldman Sachs and Deutsche Bank have issued stark warnings about the potential fallout. Goldman Sachs has downgraded its 2025 GDP forecast from 2% to just 1.5%, citing the sharp deterioration in business and household confidence. They now place the odds of a U.S. recession at 35%, up from 20%. Deutsche Bank highlighted that, if implemented, the tariffs would raise America’s trade barriers to their highest levels since World War II.
Beyond GDP, Goldman Sachs has cut its earnings expectations for S&P 500 companies, citing higher inflation, weakened economic growth, and the direct impact of tariffs. The bank projects the index to close the year at approximately 5,700, reflecting limited growth potential.
Automotive companies have also been hit hard. Shares in General Motors and Stellantis, parent company of Chrysler brands, suffered fresh declines after Trump's pledge to impose tariffs on imported autos and auto parts. Analysts warn these duties could increase the cost of a typical vehicle sold in the U.S. by as much as $10,000, disrupting the global auto industry and inflating prices for consumers.
Trump’s stance has been uncompromising. In interviews and public remarks over the weekend, he dismissed concerns about stagflation—a combination of high inflation and low growth—while maintaining that his policies would lead to economic "boomtown." Vice President JD Vance echoed Trump's rhetoric, accusing other nations of exploiting the U.S. economy.
As markets brace for Wednesday's announcement, the administration’s unwavering approach has raised questions about its willingness to navigate economic challenges. Investors, economists, and businesses alike now watch with bated breath, anticipating what could be one of the most consequential economic policy shifts of the decade. Whether this bold move proves transformative or catastrophic remains to be seen.
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