U.S. stocks fell sharply on Monday — continuing the prior week’s losses — after President Trump said the economy faces a “period of transition” due to his aggressive trade policies and would not rule out a recession this year.
The president’s trade war with China heated up on Monday as Beijing began implementing retaliatory tariffs on a range of American farm products for which China is the largest market. That includes a 15% levy on U.S. chicken, wheat and corn, and a 10% tax on soybeans, pork, beef and fruit.
Nasdaq nears “correction”
The S&P 500 slipped 2%, on track for its worst day so far this year, leaving it down more than 8% from a record high set in February and nearly a “correction,” a term for a drop of 10% or more. The index shed 3.1% last week, its worst weekly performance since September.
The tech-heavy Nasdaq was hit even harder, with the index entering into a correction last week and down more than 3% on Monday. Tesla’s shares plummeted more than 8%, and Alphabet, Apple and Nvidia each fell more than 4%.
The Dow Jones Industrial Average was down 470 points, or 1.1%, at 42,332.
Stocks in Asia and Europe also fell, but not nearly as hard as seen in U.S. markets.
Wall Street’s losses come a day after Mr. Trump declined to state whether he expects a recession this year, with the president telling Fox News in an interview broadcast on Sunday that “I hate to predict things like that. There is a period of transition, because what we’re doing is very big.” That said, Commerce Secretary Howard Lutnick told NBC’s Meet the Press on Sunday that there is no reason to ready for a recession.
Slowing growth
Goldman Sachs on Monday said it was downgrading its economic growth forecast for 2025, previously 2.4%, to 1.7%, citing the stronger headwinds resulting from the Trump administration’s trade policies.
“We now see the average U.S. tariff rate rising by 10 [percentage points] this year, twice our previous forecast and about five times the increase seen in the first Trump administration,” Jan Hatzius, chief economist at Goldman, in a note to investors.
The Trump administration last week imposed 25% tariffs on imports from Canada and Mexico before pausing the levy days later for goods covered under the U.S.-Mexico-Canada agreement.
The White House is sticking with its stance that tax cuts and tariff revenue ahead will bolster the economy, which is hitting investor sentiment, with last week marking the largest market rout since Mr. Trump was reelected four months ago.
The S&P 500 continued its fall from a record high in February, with strategists cautioning of ongoing stock volatility amid uncertainty about U.S. trade policy, tariffs and inflation. Some economists believe inflation is likely to rise this year, with economists at Morgan Stanley Research and Goldman Sachs recently hiking forecasts.
“The risks of higher inflation as a result of a broader tariff war have taken a back seat in the overall market view recently, as the risks of slower economic growth have shifted to the forefront,” stated John Canavan, lead U.S. analyst at Oxford Economics.
The White House agency of cutting taxes and regulation is geared toward bringing manufacturing and jobs back to the U.S., but the ultimate outcome of Mr. Trump’s policies is far from clear.
“Many investors support the president’s pro-growth business agenda, but the administration’s frenetic approach to policymaking is unsettling,” according to Michael Arone, chief investment strategist at State Street Global Advisors.
Kate Gibson is a reporter for CBS MoneyWatch in New York, where she covers business and consumer finance.
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