US Stock Market Sheds $4 Trillion as Trump Pushes Forward with Tariffs

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Last Updated: 17th March 2025 - 03:58 pm

3 min read

Investor concerns have intensified due to former President Donald Trump’s tariff policies, leading to a significant stock market decline. Fears of an economic slowdown have triggered a sell-off, erasing $4 trillion from the S&P 500 since its peak last month when Wall Street was largely optimistic about Trump’s policies.

Recent shifts in trade policy, particularly tariff disputes with key partners such as Canada, Mexico, and China, have created uncertainty for businesses, consumers, and investors.

"There has been a clear shift in market sentiment," noted Ayako Yoshioka, a senior investment strategist at Wealth Enhancement. "Many strategies that previously worked are now proving ineffective."

On Monday, the market downturn deepened, with the S&P 500 dropping 2.7%—its steepest single-day decline of the year. The Nasdaq Composite plummeted 4%, marking its largest one-day drop since September 2022. As of Monday’s close, the S&P 500 had fallen 8.6% from its February 19 record high, shedding over $4 trillion in value and nearing the 10% threshold that signals a market correction. The Nasdaq, which is heavily weighted in tech stocks, has dropped more than 10% from its December high.

Over the weekend, Trump refrained from predicting whether the U.S. economy could enter a recession, despite growing investor concerns over his trade policies.

"The uncertainty caused by tariff disputes with Canada, Mexico, and Europe is forcing corporate leaders to reconsider their strategic direction," said Peter Orszag, CEO of Lazard, during the CERAWeek conference in Houston. "While tensions with China are somewhat expected, the disputes with Canada, Mexico, and Europe are raising concerns. If these issues remain unresolved in the coming weeks, they could significantly impact the U.S. economy and merger-and-acquisition activity."

Delta Air Lines also slashed its first-quarter profit projections by half, leading to a 14% drop in its share price during after-hours trading. CEO Ed Bastian attributed the decline to growing economic uncertainty in the U.S.

In addition to trade concerns, investors are closely monitoring whether lawmakers can pass a funding bill to prevent a partial government shutdown. A key inflation report is also due on Wednesday.

"The Trump administration appears more willing to accept market declines and even the possibility of a recession to achieve its broader policy objectives," said Ross Mayfield, an investment strategist at Baird. "That realization is a wake-up call for Wall Street."

According to data from the Federal Reserve Bank of St. Louis as of July 2024, the bottom 50% of U.S. households by wealth own just 1% of corporate equities and mutual fund shares, whereas the top 10% hold 87%.

The S&P 500 saw consecutive gains of over 20% in 2023 and 2024, largely driven by major technology stocks like Nvidia and Tesla. However, in 2025, these stocks have struggled, weighing on market indices. On Monday, the technology sector of the S&P 500 dropped 4.3%, while Apple and Nvidia each declined by about 5%. Tesla saw a significant 15% drop, wiping out approximately $125 billion in market value.

Other risk assets also faced setbacks, with Bitcoin falling by 5%. Meanwhile, defensive sectors performed better, with utilities posting a 1% gain. U.S. government bonds attracted increased demand, pushing 10-year Treasury yields down to approximately 4.22%.

Market Sentiment and Valuation Concerns

The S&P 500 has erased all gains recorded since Trump’s election on November 5, falling nearly 3% during that period. Hedge funds also cut their stock exposure on Friday at the fastest pace in over two years, according to a Goldman Sachs report.

Initially, investors were optimistic about Trump’s pro-business policies, including tax cuts and deregulation. However, ongoing tariff disputes and other policy shifts, such as proposed federal workforce reductions, have dampened enthusiasm.

"When Trump took office, there was a broad consensus that economic conditions would improve," said Michael O’Rourke, chief market strategist at JonesTrading. "But with any major structural changes, uncertainty and friction are inevitable. Investors are understandably cautious and beginning to take profits."

Despite the recent downturn, stock valuations remain elevated compared to historical averages. As of Friday, the S&P 500 was trading at just above 21 times projected earnings for the next year, well above its long-term average forward P/E ratio of 15.8, according to LSEG Datastream.

"Many investors have been concerned about high valuations in U.S. equities for some time, waiting for a catalyst that could trigger a market correction," said Dan Coatsworth, an investment analyst at AJ Bell. "A combination of trade war fears, geopolitical tensions, and economic uncertainty could be that catalyst."

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