Trump’s tariffs threats and actions have ignited a trade war that many economists say threatens to undermine global economic stability. On Thursday, Trump said he would impose a 200% duty on wine and champagne imported from the E.U. in response to the region’s targeting of U.S. whiskey imports — itself a reaction to the president’s 25% steel and aluminum duties coming online.
Meanwhile, the prospect of stagflation — meaning accelerating price increases alongside lackluster growth — has increased. Underlying data in two inflation reports this week suggest that the Federal Reserve’s preferred measure of inflation will show that price growth remained elevated in February, undercutting Trump’s campaign promise to counter price increases.
On Thursday, Treasury Secretary Scott Bessent said that the Trump administration is more focused on the long-term health of the economy and the markets, rather than short-term movements. “I’m not concerned about a little bit of volatility over three weeks,” he said on CNBC’s “Squawk on the Street.”
Some commentators say that any economic downturn will be brief, and that falling stocks are merely reflecting a lower appetite for riskier assets like equities in tech firms, which have seen the biggest draw-downs, and cryptocurrencies, which have also taken heavy losses.
“Speculative assets have been sliding not because investors have determined the true cost of tariffs, but instead because the marketplace has suffered one of its periodic bouts of risk on, risk off,” John Rekenthaler, a markets commentator and former vice president at the Morningstar investment firm, wrote in a recent column.
Other investors are not buying it.
“With policy uncertainty extraordinarily elevated, the U.S. economy has already begun to be negatively impacted,” Seema Shah, chief global strategist at Principal Asset Management, said in a note to clients Thursday.
“The government appears to be following the ‘eat your vegetables before you have dessert’ approach, introducing import tariffs and federal employee job cuts in the first few weeks of the presidential term, but no corresponding moves to ease regulatory policy. So far in 2025, the U.S. economy has only faced headwinds and has not yet benefitted from any tailwinds.”
The Nasdaq has already been in correction territory. The Dow Jones Industrial Average is not, and remains about 300 points away.
