Financial markets around the world were slammed on Monday, as investors recoiled from the prospects of a severe economic downturn sparked by the escalating trade war.
The S&P 500 swung wildly, as traders digested the White House’s rebuttal of rumors about a pause to tariffs. Much of the boost from the rumor faded before the afternoon. The index traded nearly 2 percent lower in late morning, in line with where it was earlier in the day.
The U.S. benchmark index has been approaching bear market territory, defined as a drop of 20 percent or more from a recent peak. The S&P 500 closed on Friday down 17.4 percent from its peak in February.
Fears about the global fallout from the trade war intensified as hopes faded that the Trump administration would soften the tariffs imposed on America’s major trade partners.
On Sunday evening, President Trump doubled down, saying that he would not ease his tariffs on other countries “unless they pay us a lot of money.” When asked by reporters on Air Force One about the market turmoil and fears of a recession, he said that “sometimes you have to take medicine to fix something.”
The Nasdaq Composite index, which is dominated by technology stocks, nudged higher on Monday but remains more than 22 percent below its December peak.
Stocks in Europe were also down across the board, with the benchmark pan-European index dropping roughly 3 percent.
In Asia, trading was extremely volatile throughout the day. Among the markets hardest hit were Hong Kong, where stocks plunged 13 percent, and Taiwan, which tumbled 10 percent. Stocks in mainland China were down 7 percent.
“There’s no sign yet that markets are finding a bottom and beginning to stabilize,” analysts at Deutsche Bank wrote in a note.
On Friday, China struck back at the United States with a 34 percent tariff on a number of American exports, matching a 34 percent tariff that Mr. Trump imposed on Chinese goods last week. China’s levies are set to go into effect later this week, shortly after the Trump administration’s “reciprocal” tariffs on dozens of countries are imposed. On Saturday, a 10 percent “baseline” tariff came into effect on nearly all goods coming into the United States.
Over the weekend, analysts had circulated notes warning that Asia could be particularly vulnerable to a tit-for-tat exchange of retaliatory tariffs between China and the United States. Many countries in the region, including Japan and South Korea, count both nations as their top trading partners.
Benchmark indexes in South Korea tumbled about 5 percent, while Australia fell more than 4 percent. In Japan, declines were so sharp that the country’s exchange operator briefly halted trading in Japanese stock futures on Monday morning. The country’s Nikkei 225 index closed down more than 7 percent.
Technology stocks across Asia were clobbered. Taiwan Semiconductor Manufacturing Company, the world’s largest chip manufacturer, fell nearly 10 percent, while Apple’s main contract manufacturer, Foxconn, also plunged 10 percent. In Hong Kong, the Chinese technology giants Alibaba, Tencent and Xiaomi all plummeted by double-digit percentages.
Japan’s Nintendo, which cited tariffs when it delayed pre-orders for the sequel to its best-selling Switch video game console, declined more than 7 percent.
In oil markets, prices fell about 1.5 percent, adding to steep losses last week.
The 10.5 percent drop in the S&P 500 on Thursday and Friday was the worst two-day decline for the index since the onset of the coronavirus pandemic in 2020. On Friday, the S&P 500 closed 17.4 percent below its peak from February.
The only other instances of a worse two-day drop came during the 2008 financial crisis and the 1987 stock market crash, according Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. In dollar terms, the more than $5 trillion that was wiped out in the S&P’s value in the two days last week stands unmatched.
Even more unusual is that last week’s sell-off stemmed directly from presidential policy.
The historically high tariffs that Mr. Trump announced on Wednesday caught investors, economists and businesspeople off guard, upending economic forecasts.
Chief executives have begun warning consumers that they should expect prices to increase on some groceries, clothes and other products. Consumers have said they intend to rein in spending on big-ticket items. Some auto companies have already announced production pauses overseas, as well as job losses domestically. Bank economists have raised the odds that a recession will hit the United States over the next 12 months. As countries responded last week with tariffs of their own, the sell-off in financial markets accelerated.
The hedge fund manager Bill Ackman said on the social media platform X on Sunday that he supported Mr. Trump’s attempt to fix global tariffs, but implored the president to call a “90-day time out” on Monday.
Otherwise, “we are heading for a self-induced, economic nuclear winter, and we should start hunkering down,” he said. “May cooler heads prevail.”
Keir Starmer, the British prime minister, warned on Saturday that “the world as we knew it has gone” and urged countries not to retaliate against the United States and enter a full-blown trade war.
Still, some investors remain cautiously optimistic that the solid economy from the start of this year will withstand the onslaught of high tariffs, before the president turns to tax cuts and deregulation to stimulate the economy and avoid a recession.
Scott Bessent, the Treasury secretary, said on Sunday on the NBC program “Meet The Press” that he saw “no reason” to expect a recession.
But analysts warned that the damage to the economy will depend on how long tariffs remain at elevated levels.
“We remain very cautious,” said Stuart Kaiser, an equity analyst at Citi. Even with last week’s drop, he said, markets may have further to fall because earnings and economic growth expectations remain “well above levels consistent with announced tariff levels.”
Tony Romm contributed reporting.
River Akira Davis covers Japan, including its economy and businesses, and is based in Tokyo. More about River Akira Davis
Eshe Nelson is a reporter based in London, covering economics and business news for The New York Times. More about Eshe Nelson
Joe Rennison writes about financial markets, a beat that ranges from chronicling the vagaries of the stock market to explaining the often-inscrutable trading decisions of Wall Street insiders. More about Joe Rennison
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