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2025 stock market crash

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2025 stock market crash
The decline of the S&P 500 (dark blue), Nasdaq (light blue), and Dow Jones (pink) on April 3–4. This graph is over a period of three months.
DateApril 2, 2025
(5 days)
Type
Cause

Beginning on April 2, 2025, global stock markets began to experience significant economic downturn, as a result of tariffs and trade wars initiated by the president of the United States, Donald Trump. On that day, Donald Trump declared "Liberation Day", announcing sweeping tariffs that affect almost all aspects of the U.S. economy. He had accepted claims that he was intentionally attempting to cause a stock crash,[1] which increased economic tensions with allies, as well as the possibility of a global trade war and recession. Global stock markets, including in the United States following "Liberation Day", experienced panic selling. It is currently the largest decline in the global stock market since the 2020 stock market crash, which was caused by the COVID-19 pandemic and was also during Trump's first presidency.[2]

At the beginning of Donald Trump's second term, he was inaugurated inheriting a particularly strong domestic stock market.[3] While this was maintained for a period of a few weeks after his inauguration, the Trump administration began making and announcing increasingly aggressive trade policies in an attempt to practice protectionism and economic pressure, including heightening previous trade wars, starting new trade wars, heavy tariffs, and increasing tensions with allies;[4] most prominently, Canada. As the administration continued to practice these policies, markets began to experience continued turbulence, volatility, and general uncertainty.[3]

The Dow Jones index lost 4,000 points in the span of 48 hours, being the first back-to-back 1,500+ loss in its history.[5] Japan's Nikkei dived nearly 8%, triggering a trading curb.[6] The Canadian TSX decreased by 4.8% in one day. VIX market volatility doubled, skyrocketing to more than half of the heights it had achieved during the pandemic, and an increased risk of a recession,[3] and the possibility of economic retaliation exacerbated the effects.[5]

Background

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Some of the tariffs introduced on April 2, 2025. Note that the calculations done for "Tariffs charged to the U.S.A" are based on trade deficits, not tariffs.[7]
See also: Tariffs in the second Trump administration

Since the start of his second term, Donald Trump has pursued a policy of economic autonomy and economic protectionism, in an attempt to incentivize U.S.-based industry growth and reduce the USA's trade deficit.[8] The Trump administration began using tariffs to incentivize countries to buy and invest in American products and industry.[9] This began with heightened tensions with the already ongoing U.S-China trade war by introducing higher tariff rates,[10] and initiated the U.S v. Mexico-Canada trade war with new tariffs on Mexican and Canadian imports. These tensions had begun to create stock market instability, and raise fears of a possible recession.[11] By February 2025, the stock market began to experience a decline.[12]

On March 21, 2025, Trump announced "Liberation Day", a day on which he would announce large-scale tariffs onto countries with a trade deficit. Though no specifics were provided beyond promising larger tariffs, fears of a larger trade war began to create more market volatility. Prior to the announcement, the S&P 500 dropped by 10.1% by March 13 of that year, following its February peak.[13] Donald Trump announced Liberation day would occur on April 2, because he "didn't want [it] to be April Fool's Day because then nobody would believe what I said",[14] and that on that day, he would introduce worldwide tariffs.[15] Trump imposed the tariffs unilaterally under powers granted by the International Emergency Economic Powers Act by declaring that the United States' ongoing trade deficit was a national emergency.[16] Upon their introduction, the new tariffs were considered incredibly sweeping, including but not limited to: a 10% "baseline" tariff imposed on all imports barring a few resource exceptions (including on the uninhabited McDonald Islands), a 54%[17] rate for China, a 20% rate for the European Union, 46% for Vietnam, 36% for Thailand, 24% for Japan, 49% for Cambodia, and 32% for Taiwan.

On the same day as "Liberation Day", China announced retaliatory tariffs of 34% against the United States, as a response to the tariffs placed on them, starting on April 10.[18][19] Donald Trump responded to this on Truth Social proclaiming "China played it wrong, they panicked - the one thing they cannot afford to do!" implying that the tariffs on China would not be lifted, eventually leading to another drop in stocks.[20] While economic protectionism became increasingly popular among Americans over the last decade, the sweeping tariffs immediately faced heavy backlash from many Americans, including protectionists,[21] both Republican Party and Democratic Party officials,[22][21][23] and economists[24][25] citing it as an abuse of power, an over-extension of economic policy, a "worse than the worst case scenario" for U.S markets or a potential "Black Monday" event.[26][27] The tariffs also precipitated concern among world leaders.[28]

Initial downturn

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North America

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Upon the market opening on April 3, the Nasdaq lost 1,600 points, the worst sell-off since the start of the COVID-19 pandemic. The S&P 500 lost 6.65% of its value on April 3, nearly initiating a trading curb (which begins at 7%.). The following day, April 4, China imposed a 34% retaliatory tariff.[5] This plunged the Dow Jones index by over 2,200 points, S&P 500 losing 6% once again, and, following the Nasdaq losing 5.8, entered bear market territory. Within the two days, the Dow Jones index lost over 4,000 points (9.48%), S&P losing 10%, and Nasdaq losing 11%. Market volatility began to skyrocket, at over double its previous percentage before April 2, nearly reaching its COVID-19 pandemic level[29] and climbing.

April 3–4 was the first time in American history the Dow Jones index shed over 1.5k points in back-to-back days.[5] The two-day period also ranked as the worst ever for the S&P 500.[30] By April 4, the United States stock market lost nearly $5 trillion dollars.[31] Additionally, oil prices experienced a 7% decline by April 4, the lowest since 2021.[19] At the time of market open on April 7, stocks plunged further. The three-day losses being the worst since Black Monday. Just after 10:00 am (EDT) on April 7th, Walter Bloomberg of CNBC reported that Kevin Hassett, Director of the National Economic Council, stated that the Trump administration was considering a 90-day pause on all tariffs excluding China. This caused a temporary upturn in markets.[32] At 10:40 am (EDT), the Rapid Response 47 Twitter account indicated that this was "fake news". The markets responded by turning down once again.

International

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Crude oil began to experience a significant decline in price.[33] West Texas Intermediate (WTI) Showed a sharp decline, dropping below $60 per barrel, reaching as low as $58.95 before a slight recovery, but maintained the weakest position since 2021. Brent crude fell by 3.7% to $63.15 per barrel, also marking its lowest level since 2021. These drops occurred due to the fears of a possible recession and thereby a decrease in the demand for oil.[34] Similarly, base metals, such as copper, and the coffee industry both[35][36] saw a decline in price amid recession fears. The coffee industry is almost entirely located[37] within regions with tariffs applied by the United States, a country that intakes a large sum of coffee grounds through imports.

The Canadian TSX decreased by 3.8% within 24 hours, followed by 4.6% the following day, April 4.

Asia

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The KOSPI Composite Index fell over 5%. The Nikkei 255 experienced it's largest lost since March of 2020 at 7%, triggering a trading curb, and extending the economic downturn it had experienced over the last week at 9%. Futures trading was temporarily halted due to the trading curb. [38] The S&P/ASX 200 was resilient the first few days, sustaining only a small decrease, however, April 7th saw it drop by 6% within 30 minutes.

Europe

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The STOX 600 index saw a decrease of 3.34% from April 2 to 4. The following trade week, starting April 7, it fell by 5.47% within one hour, and closed at a 4.50% decrease.

Index changes

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Date April 3 April 4 April 5
Close Change Close Change Close Change
Dow Jones 40,545.93 −1,679.39 (−3.98%) 38,314.86 −2,231.07 (−5.50%) TBD TBD
Nasdaq 16,550.60 −1,050.44 (−5.97%) 15,587.79 −962.82 (−5.82%) TBD TBD
S&P 500 5,396.52 −274.45 (−4.84%) 5,074.08 −322.44 (−5.97%) TBD TBD
Russell 2000 1,910.55 −134.82 (−6.59%) 1,830.26 −80.29 (−4.20%) TBD TBD

Response

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United States

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After the US stock market lost significant value, President Donald Trump said on April 3 regarding his tariffs that events were "going very well", as the "markets are going to boom, the stock is going to boom, the country is going to boom".[39] The next day, Trump addressed investors, declaring on social media: "my policies will never change. This is a great time to get rich, richer than ever before!!!"[40] Treasury Secretary Scott Bessent commented on April 6: "I see no reason that we have to price in a recession".[41]

Despite Trump's insistence, Chair of the Federal Reserve Jerome Powell refused to issue emergency cuts to lower interest rates.[31]

International

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Germany

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In response to the tariffs, the German Chancellor Olaf Scholz stated "This is an attack on a trade order [...] that is essentially a result of American efforts".[42]

Australia

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The prime minister of Australia Anthony Albanese reacted to the tariffs on Heard Island and McDonald Islands, saying "It just shows and exemplifies the fact that nowhere on Earth is safe from this".[43] On April 7, Australian stocks began to fall substantially.[44]

China

The Chinese stock market lost considerable value along with other global markets. In response, China suspended imports from some American companies and put export controls on earth minerals and various technologies.[45] Foreign Ministry spokesperson Lin Jian called the tariffs "protectionist bullying", while imploring American companies to take steps to safeguard the stability of the global supply chain. [46] [47]

See also

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References

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  1. ^ "Trump Is Openly Bragging About Crashing the Stock Market". The New Republic. ISSN 0028-6583. Retrieved April 5, 2025.
  2. ^ Evans, Brian; Melloy, John; Singh, Pia (April 2, 2025). "Dow nosedives 1,600 points, S&P 500 and Nasdaq drop the most since 2020 after Trump's tariff onslaught". CNBC. Retrieved April 4, 2025.
  3. ^ a b c Egan, Matt (March 11, 2025). "How the US economy went from booming to a recession scare in only 20 days | CNN Business". CNN. Retrieved April 6, 2025.
  4. ^ Swanson, Ana; Kaye, Danielle; Gamio, Lazaro; Smialek, Jeanna; Fackler, Martin (April 5, 2025). "What to Know About Trump's Tariffs and the Global Trade War". The New York Times. ISSN 0362-4331. Retrieved April 7, 2025.
  5. ^ a b c d Evans, Brian; Harring, Alex; Melloy, John (April 4, 2025). "Dow drops 2,200 points Friday, S&P 500 loses 10% in 2 days as Trump's tariff rout deepens: Live updates". CNBC. Retrieved April 4, 2025.
  6. ^ "Asian markets plunge with Japan's Nikkei diving nearly 8% after the big meltdown on Wall St". AP News. April 7, 2025. Retrieved April 7, 2025.
  7. ^ "Reciprocal Tariff Calculations". United States Trade Representative. Retrieved April 5, 2025.
  8. ^ "Fact Sheet: President Donald J. Trump Declares National Emergency to Increase our Competitive Edge, Protect our Sovereignty, and Strengthen our National and Economic Security". The White House. April 2, 2025. Retrieved April 4, 2025.
  9. ^ "What are tariffs, how do they work and why is Trump using them?". www.bbc.com. April 4, 2025. Retrieved April 4, 2025.
  10. ^ "Trump eyes 10% China tariff hike by Feb. 1 | Supply Chain Dive". www.supplychaindive.com. Retrieved April 5, 2025.
  11. ^ Egan, Matt (March 11, 2025). "How the US economy went from booming to a recession scare in only 20 days | CNN Business". CNN. Retrieved April 5, 2025.
  12. ^ "Dow sheds 2,200 points as markets end another day of tariff chaos". NBC News. April 4, 2025. Retrieved April 7, 2025.
  13. ^ "The S&P 500 Joined the Nasdaq in Correction Territory Last Week. Here's What Could Happen Next". Yahoo Finance. Archived from the original on March 19, 2025. Retrieved April 7, 2025.
  14. ^ Saul, Derek (April 2, 2025). "Here's What To Know About 'Liberation Day'—From Announcement Time To What Trump May Target". Forbes. Retrieved April 4, 2025.
  15. ^ "President Trump announces new tariffs on all imports to US". www.bbc.com. April 2, 2025. Retrieved April 4, 2025.
  16. ^ Rappeport, Alan (April 3, 2025). "Trump's Tariffs Follow Anger Over Trade Imbalances and Lost Manufacturing Jobs". The New York Times. ISSN 0362-4331. Retrieved April 5, 2025.
  17. ^ "Goods imported from China now face a 54% tariff rate — and possibly higher". NBC News. April 3, 2025. Retrieved April 5, 2025.
  18. ^ "China and US at each other's throats on tariffs, and neither is backing down". BBC. April 4, 2025. Retrieved April 6, 2025.
  19. ^ a b Somasekhar, Arathy (April 4, 2025). "Oil dives 7% to lowest in over 3 years on China's tariffs". Reuters.
  20. ^ "Stocks slump again after China fires back in trade war with tariffs on US goods". Reuters. April 5, 2025. Retrieved April 6, 2025.
  21. ^ a b Millhiser, Ian (April 4, 2025). "The right is cooking up a surprising legal fight against Trump's tariffs". Vox. Retrieved April 5, 2025.
  22. ^ "House Republican moves to rein in tariff powers". POLITICO. April 4, 2025. Retrieved April 5, 2025.
  23. ^ Popli, Nik (April 3, 2025). "'He's Going to Tank Our Economy': Congress Reacts to Trump Tariffs". TIME. Retrieved April 7, 2025.
  24. ^ Klein, Ezra (April 5, 2025). "Opinion | Paul Krugman on the 'Biggest Trade Shock in History'". The New York Times. ISSN 0362-4331. Retrieved April 5, 2025.
  25. ^ "Here's why experts think Trump's tariffs could hurt the U.S. economy - CBS News". www.cbsnews.com. April 4, 2025. Retrieved April 5, 2025.
  26. ^ "Trump's new tariffs 'worse than the worst case scenario,' Wedbush's D…". archive.is. April 3, 2025. Retrieved April 5, 2025.
  27. ^ Swanson, Ian (April 6, 2025). "Stock futures drop sharply, Jim Cramer warns of new 'Black Monday'". The Hill.
  28. ^ "Sweeping Trump tariffs shock global economy, drawing threats and calls for talks". AP News. April 2, 2025. Retrieved April 5, 2025.
  29. ^ "Market volatility 'could surely get worse before it gets better'". Pittsburgh Post-Gazette. Retrieved April 5, 2025.
  30. ^ Santoli, Michael (April 5, 2025). "S&P 500s 10% 2-day collapse from Trump's tariff shock ranks among the deepest in history". CNBC. Retrieved April 5, 2025.
  31. ^ a b Saul, Derek (April 4, 2025). "Tariffs Cause Another Stock Market Rout—Losses Approach $5 Trillion As Dow Plummets Another 2,200 Points". Forbes. Retrieved April 4, 2025.
  32. ^ Doherty, Dan Mangan,Kevin Breuninger,Christina Wilkie,Michael Wayland,April Roach,Erin (April 7, 2025). "White House says 'Fake News' that Trump is considering 90-day pause: Live updates". CNBC. Retrieved April 7, 2025.{{cite web}}: CS1 maint: multiple names: authors list (link)
  33. ^ Herzlich, Taylor (April 7, 2025). "Oil slumps to $60 a gallon as recession fears mount". Retrieved April 7, 2025.
  34. ^ Herzlich, Taylor (April 7, 2025). "Oil slumps to $60 a gallon as recession fears mount". Retrieved April 7, 2025.
  35. ^ Bigg, Matthew Mpoke; Nelson, Eshe; Zhuang, Yan (April 7, 2025). "Trump Tariffs Live Updates: Stocks and Global Markets Waver as Trade War Intensifies". The New York Times. ISSN 0362-4331. Retrieved April 7, 2025.
  36. ^ Limehouse, Jonathan. "What grocery items may cost more due to Trump's tariffs? Seafood, coffee, olive oil, more". USA TODAY. Retrieved April 7, 2025.
  37. ^ "Climate & Coffee | NOAA Climate.gov". www.climate.gov. June 19, 2015. Retrieved April 7, 2025.
  38. ^ "Japan's Nikkei Falls 7%". WSJ. Retrieved April 7, 2025.
  39. ^ Superville, Darlene (April 4, 2025). "Trump says things are 'going very well' after worst stock market drop in years over tariffs". Associated Press. Retrieved April 7, 2025.
  40. ^ Heavey, Susan (April 4, 2025). "Trump to investors: My policies will never change". Reuters. Retrieved April 7, 2025.
  41. ^ Berkowitz, Ben; Lotz, Avery (April 6, 2025). "Bessent: "No reason" for markets to price in recession". Axios. Retrieved April 7, 2025.
  42. ^ "Germany slams Trump tariffs, US tech titans in crosshairs". France 24. Frankfurt, Germany. AFP. April 3, 2025. Archived from the original on April 7, 2025. Retrieved April 5, 2025.
  43. ^ Mitchell, Ottilie and Turnbull, Tiffanie (April 4, 2025). "'Nowhere's safe': How an island of penguins ended up on Trump tariff list". BBC News. Sydney. Archived from the original on April 6, 2025. Retrieved April 7, 2025.
  44. ^ Barrett, Jonathan and Ittimani, Luca (April 7, 2025). "'Bloodbath' market opening sees ASX shed $160bn amid US trade war gloom as Australian dollar dives". The Guardian. Archived from the original on April 7, 2025. Retrieved April 7, 2025.
  45. ^ "China accuses US of unilateralism, protectionism, economic bullying with tariffs". The Economic Times. April 7, 2025. ISSN 0013-0389. Retrieved April 7, 2025.
  46. ^ "China calls US tariffs 'protectionist bullying'". The Economic Times. April 7, 2025. ISSN 0013-0389. Retrieved April 7, 2025.
  47. ^ Fortinsky, Sarah (4/7/2025). "China accuses US of bullying with tariffs". The Hill. Retrieved 4/7/2025. {{cite web}}: Check date values in: |access-date= and |date= (help)
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