US Stock Futures Plunge 5.4 Trillion on Trump Tariffs

US stock futures experienced a significant plunge on Sunday, following a tumultuous week that saw over $5.4 trillion in market losses. This downturn was triggered by President Donald Trump's announcement of universal tariffs, which went into effect on Saturday. The tariffs are set to escalate further on Wednesday, with higher "reciprocal" tariffs targeting nearly 90 countries, including China, where the tariffs could reach as high as 79%.

In response to the US tariffs, China has announced retaliatory measures, imposing a 34% tariff on all goods imported from the United States starting Thursday. This escalation has heightened fears of a damaging trade war, sending shockwaves through global markets. Asian markets opened to a "bloodbath," with Japan’s Nikkei falling 8% and Hong Kong’s Hang Seng Index plunging 13%. European markets followed suit, with the Stoxx 600, FTSE 100, Germany’s DAX, and French and Italian markets all dropping around 5%.

The economic impact of these tariffs is already being felt. The price of US oil fell more than 3%, sinking below $60 per barrel for the first time since April 2021. This drop reflects investor fears that the tariffs could push the global economy into a recession, reducing demand for fuel. Bitcoin also joined the selloff, falling 5.6% to $78,736.93, a steep drop from its post-election surge above $100,000.

Analysts have delivered stark assessments of the potential economic impact. JPMorgan analysts estimated that Trump’s tariffs would increase taxes on Americans by $660 billion per year, the largest tax increase in recent memory. They predicted prices would surge, adding 2% to US inflation. The nonpartisan Tax Foundation calculated that the average American household will pay $2,100 more per year for goods due to the tariffs, with America’s average import tax jumping to 19% this year from 2.5% last year—the highest rate since 1933. According to the Tax Foundation, Americans’ after-tax incomes will decline 2.1% on average this year as a result of the tariffs.

JPMorgan raised its recession risk forecast to 60%, while Goldman Sachs increased its probability of a recession in the next 12 months to about 35%. Federal Reserve Chair Jerome Powell acknowledged that Trump’s tariffs, which were more aggressive than the central bank had expected, would drive prices higher and slow economic growth. Powell indicated the Fed was monitoring the situation but wasn’t rushing to act.

Trump has maintained a defiant stance throughout the market turmoil. He has stated that the tariffs are necessary to address the trade deficit and that he is open to negotiations, particularly regarding the trade deficit with China and the European Union. Some market analysts see potential buying opportunities emerging from the selloff, noting that the deep intraday moves are a clear sign of indiscriminate and fear-based selling, which often precedes rallies.