The U.S. stock market witnessed a significant decline on Monday after President Donald Trump declined to rule out the possibility that his tariffs could trigger an economic recession. Major indices suffered their worst performances in months, amplifying concerns among investors about the potential fallout from the ongoing trade tensions.
In New York, the Nasdaq Composite plummeted by 3.81%, marking its steepest drop since September 2022. The S&P 500 fell by 2.7%, edging close to a 9% decline from its record high in February. The Dow Jones Industrial Average also tumbled by 2%. Tech giants bore the brunt of the sell-off, with Tesla shares plunging 15.4%—its worst day since 2020. Nvidia, Alphabet, and Meta also experienced significant losses.
The market turmoil came after President Trump, in an interview with Fox News on Sunday, suggested that an economic downturn might be a necessary consequence of his trade policies. “I hate to predict things like that. There will be a period of transition because what we are doing is very big,” Trump said, adding, “What I have to do is build a strong country. You cannot really watch the stock market.”
Despite the risks, Trump remains steadfast in his commitment to tariffs. Speaking to reporters on Air Force One, he reiterated his belief in the benefits of his trade strategy. “Tariffs are going to be the greatest thing we have ever done as a country. They are going to make our country rich again,” he declared.
Analysts express concern that the administration’s firm stance may prioritize political objectives over economic stability. “Trump is willing to put his political vision above the near-term outlook for the U.S. economy,” said Kathleen Brooks at XTB. Deutsche Bank’s research strategist Jim Reid noted that the government appears ready for “some pain to re-orientate the economy,” with the “pain level higher than most would have believed a few weeks ago.”
Economists warn that the approach could test the limits of the economy’s resilience. “The administration seems to be trying to test the boundaries of the economy’s willingness to tolerate rising tariffs. And it doesn’t quite know where those boundaries are,” said Michael Strain, head of economic-policy studies at the American Enterprise Institute.
The market’s sharp decline indicates investors’ apprehension toward a potential hard landing. For the past year, there was hope for a soft landing—but recent developments suggest a shift in expectations. JPMorgan Chase estimates that the risk of a recession has risen from 30% to 40% due to “extreme U.S. policies.” Goldman Sachs economists also increased their 12-month recession odds from 15% to 20%.
As the trade war escalates, the question remains: Is the pursuit of a stronger economy worth the immediate economic pain? President Trump’s willingness to edge the world’s largest economy toward recession underscores the high stakes involved in the ongoing trade disputes.
