Trump's Tariff Turmoil: Market Volatility and Economic Uncertainty

The stock market has been on a roller coaster ride since President Trump's second term began, with tariff policies fueling market uncertainty and volatility. The S&P 500, which reached an all-time high in mid-February 2025, has since plummeted more than 8% as investors grapple with the economic implications of Trump's trade war. The Dow Jones Industrial Average and the Nasdaq composite index have also felt the impact, with the S&P 500 now teetering on the edge of a bear market.



The tariff policies, which include newly implemented tariffs, prospects for additional tariffs, and reversals of announced new tariffs, have created a "roller coaster market with a wall of worry that’s under construction," according to Terry Sandven, chief equity strategist for U.S. Bank Asset Management Group. The uncertainty surrounding these policies has led to elevated market volatility, with investors bracing for more turmoil.

The economic damage caused by Trump's tariff policies is already evident. Consumer sentiment is dropping, as indicated by recent surveys from the University of Michigan and the Conference Board. This decline in consumer confidence could lead to reduced spending, which is a significant driver of economic growth. Inflation expectations have also increased, with the Federal Reserve's policymaking Federal Open Market Committee revising its 2025 economic projections to include an uptick in inflation expectations and slightly lower economic growth expectations.

The impact of these tariffs is not limited to the stock market. Corporations are already feeling the sting, with Delta pulling its guidance for 2025 as the trade war depresses bookings across the travel sector. CEO Ed Bastian stated, "With broad economic uncertainty around global trade, growth has largely stalled. In this slower-growth environment, we are protecting margins and cash flow by focusing on what we can control."

The long-term implications for investors are significant. The uncertainty surrounding tariff policies has led to a "roller coaster market with a wall of worry that’s under construction," according to Terry Sandven, chief equity strategist for U.S. Bank Asset Management Group. Market volatility is expected to remain elevated until there is more clarity on the tariff situation. Investors are advised to stay invested through periods of volatility, as timing the market is a near-impossible task. By staying invested, even through periods of volatility, investors can increase their chances of achieving higher returns. For example, over the past 15 years, the S&P 500 has grown at an annualized rate of 7.5%. However, removing only the five best trading days over that 15-year period would bring the index’s total growth down to 4.7%, and missing the 20 best trading days pulls its return into negative territory. This highlights the importance of staying invested and not trying to time the market's every movement.

In conclusion, Trump's tariff policies have had a significant impact on the stock market and the broader economy. The uncertainty surrounding these policies has led to elevated market volatility and a decline in consumer sentiment. Corporations are already feeling the impact, with some pulling their guidance for the year. Investors are advised to stay invested through periods of volatility, as timing the market is a near-impossible task. The long-term implications for investors are significant, and the economic damage caused by Trump's tariff policies is already evident.