“Worse Than the Worst Case” – The Stock Market Craters After Trump’s Tariffs

Published: April 3, 2025 by Omor IE

Key Points

The stock market is plunging as Wall Street prices in the latest tariff announcement.
The tariffs are much worse than the market had priced in.
As such, the tariffs are seen as “worse than the worst-case scenario.”
Are you ahead, or behind on retirement? SmartAsset's free tool can match you with a financial advisor in minutes to help you answer that today. Each advisor has been carefully vetted, and must act in your best interests. Don't waste another minute; learn more here.(Sponsor)

President Donald Trump announced severe tariffs on “Liberation Day,” and the market has plunged on the news. Dan Ives from Wedbush Securities called These tariffs worse than the worst-case scenario since the market just expected a 10% universal tariff and no more.

Trump did unveil the 10% baseline tariff expected by the market on all imports to the U.S. But on top of these tariffs, he introduced severe reciprocal tariffs. 54% tariffs on China if you combine the new 34% with existing tariffs, 20% on the E.U., 24% on Japan, 26% on South Korea, and 44-49% on smaller economies like Vietnam and Cambodia. There are also automotive tariffs going into effect and this will include parts later. Both Canada and Mexico are also already subject to significant tariffs.

And as you’d expect, the market has plunged on the news.

Here’s a market update as of 10:00 A.M (ET) today.

The S&P 500 is down 199.49 points, or 3.52%.
The Nasdaq Composite is down 811, or 4.6%.
Dow Jones Industrial Average is down 1,349.58 points, or 3.2%.

Investors Fear Tariff-Related Hits to the Economy

The massive tariff increase is likely to result in a global trade war and perhaps trigger a recession. And even if that doesn’t happen, these tariffs are almost sure to cause a bump in inflation. In turn, this means the Federal Reserve will have little leeway to return to cutting interest rates.

Goldman Sachs already raised recession risks to 35% before these tariffs were announced, and that risk is probably going to be much higher as the trade war starts. This is the sharpest U.S. pivot to protectionism since the 1930s and will sting markets more in the coming months.

BofA Global Research states, “If latest US tariffs continues to remain, it could push US economy to the precipice of recession.”

Macro News

The labor market still seems strong, but services data has come in weak. The S&P Services PMI report also included the following: “Some worries over the impact of Federal government policies, especially in relation to tariffs, meant confidence in the outlook fell to its second lowest since the end of 2022.”

ISM Services PMI came in at 50.8 vs. the 52.9 forecast and fell from 53.5.
US ISM Services Prices Paid came in at 60.9 vs. the 63.1 forecast.
US ISM Services New Orders came in at 50.4 vs. the 51.9 forecast.
US ISM Services Employment came in at 46.2 vs. the 53 forecast.
US initial jobless claims came in at 219,000 vs. the 225,000 forecast. Continued jobless claims came in at 1.903 million vs. the 1.87 million forecast.

Other Assets

Gold: Down 1.3%. It is still seen as a safe-haven asset, but tariff-related fears are hitting all investment vehicles wide and far.
Crude Oil Futures: Down 7.1%.
Natural Gas: Up 2%.
Bitcoin: Down 0.3%.