U.S. stocks plummet as tariffs drive a market slowdown. The “Trump trade” is losing momentum, and the “Trump put” is nowhere in sight.

U.S. Stocks Tumble as Tariffs Trigger Market Slowdown

U.S. stocks have finally caught up with the growing sentiment in the currency and bond markets: a slowdown in the economy is on the horizon. This adjustment became evident when the Nasdaq experienced a sharp 4% drop, marking its steepest decline in over two and a half years. This significant drop in stock prices comes after weeks of signs that the economy could be facing headwinds. Along with this, bond yields also took a sharp tumble, signaling further concerns. As a result, markets are now pricing in an approximately 50-50 chance of the Federal Reserve reducing interest rates in May, which indicates growing doubts about the sustainability of the current economic momentum.

Trump Trade Retreats: Tariffs Impact U.S. Stocks and Global Markets

Tesla, a bellwether for tech stocks, has seen its shares lose around half their value since their highs following the election. Once considered a key player in the “Trump trade,” Tesla’s downturn is emblematic of the broader market shift. Similarly, the U.S. dollar, which had been appreciating as investors bet on Trump’s economic policies, has now started to slide as tariffs are slapped on neighboring countries, dampening the optimism that once buoyed the currency.

Nasdaq Declines 4%: How Tariffs Are Reshaping U.S. Stocks

This signals a dramatic shift in the market narrative, with the so-called “Trump trade” now retreating. The “Trump put”—the expectation that President Trump might step in to support the market during significant declines—appears to be nowhere in sight. This expectation, which has been a cornerstone for many investors, is yet to materialize, leading to growing uncertainty in the markets. In response to these developments, Citi has downgraded its U.S. asset allocation recommendation, moving stocks from “overweight” to “neutral.” The firm stated that, for at least the next few months, it is unclear whether the U.S. economy’s outperformance will continue given the current economic and political challenges.

Tariffs Weigh on U.S. Stocks: The End of the Trump Trade?

While the U.S. markets are under pressure, Asian markets attempted to steady the ship, largely due to the fact that regions outside of the U.S. stand to benefit from any potential repatriation flows from the sale of U.S. assets. Stocks in Tokyo, Seoul, Hong Kong, and Sydney all showed signs of recovery from early lows, but the mood remained skittish, with investors cautious about further economic fallout. U.S. equity futures also saw a dip in early trading, although they managed to recover, yet have struggled to make any significant progress beyond flat levels.

Economic Slowdown Fears Grow: U.S. Stocks and Tariffs Drive Market Shift

In the currency markets, the Japanese yen continued its rise, reaching a new five-month high. Some traders noted that this was not due to a shift in dollar/yen dynamics, but rather due to stocks adjusting to the movements seen in the currency markets. Meanwhile, the euro has shown little reaction to recent political developments in Germany, where the Green party has promised to block plans for increased military spending. Many believe, however, that a compromise is likely, and this expectation may be keeping the euro relatively stable.

Trump’s Tariffs Impact Stock Markets as Economic Slowdown Looms

Overall, while the U.S. stock market faces significant challenges, particularly driven by rising tariffs, global markets are adapting to the shifting landscape. As tariffs continue to weigh on investor sentiment, the “Trump trade” seems to be losing its edge, and the future of U.S. economic growth remains uncertain.