US-China Trade War Sinks S&P 500 15% Nasdaq 20%

On April 2, 2025, President Donald Trump declared a national economic emergency and announced sweeping new import tariffs. Dubbed “Liberation Day,” the policy set a baseline 10% tariff on all foreign goods, with a massive 145% rate on products from China. The move was framed as a way to fix long-standing trade imbalances and protect national industries. China responded almost immediately. Tariffs on US imports jumped to 125%, and restrictions were introduced on the export of rare earth elements, materials essential to global manufacturing. Within days, trade between the world’s two largest economies had slowed dramatically.

The markets didn’t take it well. The S&P 500 dropped 15% in under a week. The Nasdaq was down nearly 20% for the year by April 7. Investors were rattled by the scale of the escalation and the potential knock-on effects on global growth. Crypto didn’t stay quiet either. As stocks fell and uncertainty spread, Bitcoin (BTC) saw a surge in trading volumes, with many turning to digital assets as a hedge.

Markets don’t like surprises – and they really don’t like trade wars. When the US announced its 145% tariff on Chinese imports in April 2025, the response from Wall Street was swift and brutal. The S&P 500 tanked more than 10% in just two days. Tech stocks took it even harder, with the Nasdaq shedding nearly 20% since the start of the year. Tariffs raise the cost of imported goods, which squeezes profit margins for companies that rely on international supply chains. When a carmaker or electronics brand has to pay more for components, that cost either eats into profits or gets passed on to customers. Either way, it’s bad news for earnings, and earnings are what drive stock valuations. There’s also the fear factor. Trade wars inject a lot of uncertainty into the economy. Will more tariffs follow? Will other countries retaliate? That kind of unpredictability causes companies to delay investments and hiring, while consumers may start pulling back on spending. This shows up as increased market volatility.

The tariffs hit crypto, too, but the market recovered just days later, reflecting crypto’s volatile yet responsive nature during global uncertainty. After Trump’s new tariffs were announced, Bitcoin slid to around $76,000. Ethereum and other major tokens followed suit, and around $200 billion was wiped off the total crypto market cap in a few days. This kind of sell-off isn’t unusual. When uncertainty spikes – like during a sudden escalation in global trade tensions – investors tend to play it safe. That means pulling out of more volatile assets, including crypto, and moving into what’s seen as safer ground, like cash or bonds. It’s a classic “risk-off” move. But as you've seen before, crypto doesn’t stay down for long. By mid-April, Bitcoin had bounced back and was trading at just under $85,000. Ether (ETH), XRP (XRP) and other major altcoins also recovered some ground. For many investors, this rebound was a reminder that while crypto is volatile, it’s also increasingly viewed as a valuable hedge, something outside the reach of any government or policy decision.

The ripple effects of the 2025 trade war are grinding through global supply chains, one industry at a time. From electronics to autos to medicine, the cost of moving goods worldwide is rising. Electronics are at the heart of it. In 2024, the US imported $146 billion of electronics from China. With tariffs on those goods jumping, companies could be looking at an added $182 billion in annual costs if these rates stick around. This is also a problem for consumers. Take Apple, for example. With no lasting exemption for phones, an iPhone 16 Pro Max could climb from $1,199 to over $1,800. Add in uncertainty about future duties on laptops, chips and smart devices, and the entire sector is on edge. Carmakers are in a similar bind. The US has raised tariffs on Chinese-made vehicles from 25% to more than 100%. And it’s not just the finished cars — batteries, chips, and other parts sourced from China are also caught in the crossfire. For electric vehicle manufacturers, in particular, this is a serious hit. Chinese battery components are essential for many US and European EV brands. With supply chains suddenly tangled in red tape and higher costs, some automakers are pausing production or switching suppliers. Even the healthcare system is feeling it. The US depends heavily on China for key medical supplies and pharmaceutical ingredients. With new tariffs, prices are climbing, and existing shortages are worsening. Industry experts are warning of major disruptions. Everything from common medications to hospital-grade equipment is likely to get more expensive. And in a healthcare system already under pressure, even a small bottleneck can cause big problems down the line.

The big picture regarding the 2025 US-China trade war still looks hazy amid real implications for investors, business leaders and policymakers worldwide. There’s been a bit of short-term relief. When the US announced exemptions on some tech products – like smartphones and laptops – from the harshest tariffs, markets breathed a sigh of relief. The S&P 500 saw an uptick, and global markets followed suit. Tech-heavy Asian indexes rallied, and European markets, including Germany’s DAX and the UK’s FTSE 100, climbed. Even US bank earnings helped push optimism a bit further. Still, it’s probably temporary. These exemptions are under review, and the bigger trade policy feels like shifting sand. Looking ahead a bit further, the risks start to grow. If the trade conflict drags on, it could seriously slow down global growth. Central banks are already weighing their next moves; interest rate adjustments, coordinated actions, and contingency planning are all back on the table. Some voices, like former UK Prime Minister Gordon Brown, call for a global response similar to what we saw during the 2008 financial crisis. Meanwhile, businesses are rethinking their supply chains and scrambling to find alternatives, something that’s easier said than done. You’re seeing a pivot with nations exploring new trade deals and trying to reduce reliance on traditional powerhouses. China, for example, is pushing harder to internationalize the yuan and accelerate its Belt and Road Initiative. Conversely, the US is leaning into domestic manufacturing and trying to reduce its dependence on imports. And the consequences could be massive. The WTO has warned that trade between the US and China could shrink by as much as 80%. That’s a huge shift, considering these two countries account for about 3% of global trade. If that drop materializes, it could rattle the global economy.

In summary, the 2025 US-China trade war has had a significant impact on both traditional stocks and cryptocurrencies. The sudden imposition of high tariffs by both countries led to a sharp decline in stock markets, with the S&P 500 and Nasdaq experiencing substantial losses. The uncertainty and increased costs associated with tariffs have squeezed profit margins for companies reliant on international supply chains, leading to a delay in investments and hiring. Meanwhile, cryptocurrencies initially saw a sell-off but quickly recovered, demonstrating their volatile yet responsive nature during global uncertainty. The trade war has also had ripple effects on various industries, including electronics, automotive, and pharmaceuticals, leading to increased costs and supply chain disruptions. The long-term implications of the trade war remain uncertain, with potential impacts on global growth and the need for nations to explore new trade deals and reduce reliance on traditional powerhouses.