The stock market is going for a ride. With reports that $2.5 trillion has been wiped off of Wall Street, the second Trump Administration has people scrambling for their savings. On February 13, 2025, President Donald Trump announced a plan for reciprocal tariffs, promising to match half the tax rates foreign nations place on U.S. imports. Although this provided the government with nearly $200 million in tax revenue per day (the Trump administration claims $2 billion), it threatened to raise prices for imported goods.
The price of a stock is determined by a combination of hard data—profit, holdings, and dividends—as well as soft data like analyst opinions and market trends. When the S&P 500 dropped nearly 10% in the month following Trump’s announcement, investors were reacting to changes in soft data. According to a Bank of America research report on the U.S. market in April, “Measures of hard data, e.g., jobless claims, industrial production, building permits are above historical norms while soft data [confidence, sentiment, and new product orders] languishes below average.”
While investors are predicting the market will struggle in the future, the tariff announcement, which caused the $2.5 trillion selloff, has not yet had much of a direct impact on the economy.
Stocks have shown signs of recovery since Trump announced his 90-day tariff pause on April 9, 2025, leading to a remarkable rebound. On that day, the S&P 500 saw its best daily performance in nearly seventeen years.
The stock market’s recent volatility is driven by fears of a future recession, not tangible changes.
Still, the market is continuing to recover, with the S&P 500 and Dow Jones Industrial Average nearly recouping their April declines. This up-and-down has led to a profitable opportunity for some community members. Even though the stock market is on a strong trajectory right now, the reinstatement of the tariffs is still on the horizon. In the best-case scenario, Trump’s tariffs bring foreign nations with much higher tariffs than our own to the negotiation table, potentially bringing jobs to the U.S. and promoting free trade. At worst, the possibility of a global trade war that raises tariffs higher than ever, triggering an inflationary crisis in the US.
The stock market’s recent volatility is driven by fears of a future recession, not tangible changes. Though there is no doubt that higher tariffs are disadvantageous for companies, this period of fluctuation has created opportunities for savvy investors who capitalized on buying the dip. With the reinstatement of tariffs in the near future, there is a wide range of possibilities for the U.S. economy.
