Stock Market Struggles Under Trump’s Second Term as Trade War Intensifies

Market Performance in Trump’s First 60 Days

President Donald Trump campaigned on the promise of rebuilding the "Greatest Economy in History," yet his first 60 days in office have seen a stark contrast to those ambitions. The stock market has tumbled significantly since his inauguration, with the S&P 500 down 7%, the Dow Jones Industrial Average falling 6%, and the Nasdaq plummeting 10%.

This sharp decline marks a dramatic reversal from Trump’s first term, during which the major indices climbed roughly 5% in the first two months. Moreover, it compares unfavorably to President Joe Biden’s first 60 days in 2021, when the S&P 500 posted a modest but positive 2% gain.

The Impact of Trump’s Tariff War

At the heart of this market volatility is Trump’s aggressive tariff policy, which has reignited global trade tensions. In February, Trump signed an executive order imposing sweeping tariffs on imports from China, Mexico, and Canada, claiming that these measures would generate "hundreds of billions in tariffs" and make the U.S. economy "so rich we’re not going to know where to spend that money."

However, international retaliation was swift. China, Canada, and Mexico all announced reciprocal tariffs on American goods, ranging from industrial equipment to agricultural products. Additionally, the European Union responded with levies on American beef, motorcycles, and bourbon, prompting Trump to threaten a massive 200% surcharge on European wine and champagne.

Wall Street’s Reaction and Recession Fears

The abrupt escalation in trade tensions has unsettled financial markets, leading some analysts to warn of a potential economic slowdown. JPMorgan’s chief economist, Bruce Kasman, cautioned that continued “disruptive, business-unfriendly policies” could increase the risk of a recession.

Economic data also paints a concerning picture. U.S. gross domestic product (GDP) growth slowed from 3% in Q3 to just above 2% in Q4, signaling a deceleration in economic activity. Meanwhile, consumer sentiment fell by 10% in March, according to the University of Michigan’s Survey of Consumers, as Americans grew increasingly pessimistic about the economy’s trajectory.

Administration’s Response and Market Outlook

Despite the downturn, Treasury Secretary Scott Bessent attempted to downplay concerns, stating, "I’m not concerned about a little bit of volatility over three weeks." However, market uncertainty remains high, particularly as investors anticipate key economic indicators, such as February retail sales data and the Federal Reserve’s upcoming policy meeting.

The market’s next moves will likely hinge on whether Trump moderates his trade stance or doubles down on protectionist measures. If tariffs continue to escalate, investors could brace for further volatility, while a policy shift toward stability could help restore confidence and prevent a deeper downturn.