Market Turmoil: Stock Market Plunges on Trump’s Tariff Announcement – April 4, 2025
Major Indexes Suffer Worst Single-Day Losses Since 2020
The U.S. stock market experienced a dramatic selloff on Thursday, April 3, 2025, with major indexes recording their worst single-day performance since the early days of the COVID-19 pandemic. The downturn continued into Friday morning as investors reacted to President Donald Trump’s announcement of sweeping new “Liberation Day” tariffs and China’s retaliatory measures.
The Dow Jones Industrial Average (DJI) plummeted 1,679.39 points (4%) on Thursday to close at 40,545.93, marking its worst single-day performance since June 2020. The tech-heavy Nasdaq Composite fell even more dramatically, shedding 1,050.44 points (6%) to finish at 16,550.61, its worst day since March 2020. The S&P 500 dropped 274.45 points (4.8%) to end at 5,396.52.
As of early Friday morning, April 4, futures indicated further losses, with Dow futures down 1,146 points (2.7%) following China’s announcement of a 34% levy on all U.S. products, matching the tariff rate on Chinese goods announced by President Trump.
Why Is the Market Down? Trump’s Tariff Announcement Triggers Global Selloff
The market rout was triggered by President Trump’s announcement of new tariffs on Wednesday, April 2. The baseline tariff of 10% will be imposed on all imports starting April 5, with rates potentially rising as high as 54% on countries depending on what duties those governments levy on U.S. exports.
Financial markets around the world reeled following this announcement, with the U.S. stock market taking the worst hit. Economists and financial experts have expressed serious concerns about the effect of these tariffs on U.S. economic growth, particularly regarding inflation, which has remained sticky despite a 1% cut in the benchmark interest rate by the Fed last year.
Market participants are increasingly concerned about a near-term recession and, in the worst case, stagflation in the U.S. economy.
Tech Stocks Lead the Decline
Technology companies with significant exposure to China led the market decline. In premarket trading on Friday, Apple (AAPL) and Qualcomm (QCOM) were down 5% and 6%, respectively. Tesla (TSLA) lost 5%, while Nvidia (NVDA) fell about 4%.
The Technology Select Sector SPDR (XLK) tumbled 6.8% on Thursday, reflecting the broad selloff in tech stocks. The Consumer Discretionary Select Sector SPDR (XLY) and the Energy Select Sector SPDR (XLE) also saw significant declines of 6% and 7.9%, respectively.
Among the “Magnificent Seven” stocks, Microsoft (MSFT) and Amazon (AMZN) are currently down 19.7% and 25.8% from their all-time highs, respectively. Amazon’s stock price fell 8.89% on Thursday alone to $178.59.
Federal Reserve’s Policy Dilemma
The Federal Reserve now finds itself in a potential policy box as a result of the tariff announcements. The central bank is tasked with ensuring full employment and low prices, but if tariffs challenge both objectives, choosing whether to ease policy to support growth or tighten to fight inflation won’t be easy.
Economists project that unless the duties are negotiated lower, they could reduce economic growth to near zero or possibly push the economy into recession, while potentially driving core inflation in 2025 north of 3% and possibly as high as 5%. With the Fed targeting inflation at 2%, this presents a significant challenge to its policy objectives.
Traders have ramped up their bets that the Fed will act to boost growth rather than fight inflation. According to the CME Group’s FedWatch tracker, the market is now pricing in the equivalent of four quarter-percentage-point reductions this year. The odds of a quarter-point cut in May jumped from 10.62% on Wednesday to 26% by Thursday morning.
Upcoming Market Events
As investors navigate this volatile market environment, several important earnings reports are scheduled in the coming weeks that could further impact market sentiment:
First-quarter earnings season is set to begin during the second full week of April, led by banking giants JPMorgan Chase (JPM) and Wells Fargo (WFC). Analysts at FactSet estimate a year-over-year earnings growth rate of 7.3% for S&P 500 companies, which would mark the seventh straight quarter of earnings growth.
Key upcoming earnings reports include:
– Week of April 28: 3M Co (MMM), Coca-Cola (KO), Eli Lilly (LLY), Advanced Micro Devices (AMD), Amazon (AMZN), and Starbucks (SBUX)
– Week of May 1: Apple (AAPL), Block (XYZ), Booking Holdings (BKNG), and Coinbase Global (COIN)
– Week of May 5: Disney (DIS), Palantir Technologies (PLTR), and Rivian Automotive (RIVN)
Market Outlook and Investor Sentiment
The fear-gauge CBOE Volatility Index (VIX) surged 39.6% to 30.02 on Thursday, marking its highest closing level since August 5, 2024.
JPMorgan late Thursday raised the odds of a recession this year to 60% from 40%, while bettors on Kalshi project a 54% chance of a U.S. downturn this year, up from 42.9% on Wednesday.
Despite the current market turmoil, some analysts see potential buying opportunities. The recent sell-off has pushed valuations of some high-quality stocks to their lowest levels in years. For example, Amazon’s price-to-earnings ratio is around 32, the cheapest valuation since 2009.
Conclusion: Navigating Uncertain Waters
As we move forward in this volatile market environment, investors should closely monitor developments related to trade policies, inflation data, and Federal Reserve communications. The coming weeks will be crucial in determining whether the market can stabilize or if further volatility lies ahead.
With the S&P 500 now down 8.2% for the year, the Dow down 4.7%, and the Nasdaq down 14.3%, investors face significant challenges but also potential opportunities as quality stocks trade at discounted valuations.
The interplay between tariffs, inflation, economic growth, and monetary policy will likely dominate market narratives in the coming months, making this one of the most complex market environments in recent years.
