On April 3, Wall Street was rattled as a sweeping wave of selling sent US stock indexes plunging in a downturn. This market scenario is the first since the early days of the COVID-19 pandemic. Markets across the globe followed suit, driven by alarm over President Donald Trump’s newly announced tariffs, measures that investors fear could severely damage both domestic and international economies.
The S&P 500 fell 4.8% for its steepest single-day decline since the pandemic-driven collapse of 2020. The Dow Jones Industrial Average plummeted 1,679 points, or 4%, while the Nasdaq composite lost a staggering 6%. The sell-off erased trillions in market value and left a few sectors unscathed.
A COVID-Like Shock to Financial Markets
Investors had braced for tariffs, but few expected the scale and scope of what Trump unveiled on April 2. Calling it “the worst case scenario for tariffs,” Mary Ann Bartels, chief investment officer at Sanctuary Wealth, said the move caught markets off guard. The president announced a minimum 10% tariff on all imports, with even steeper rates targeting countries like China and members of the European Union.
UBS strategists warned that the tariffs could shave as much as two percentage points off US economic growth this year and push inflation toward 5%. According to Bhanu Baweja of UBS, such a hit would be so big that it would make “one’s rational mind regard the possibility of them sticking as low.”
Fear swept through financial markets as investors considered the toxic combination of stalling economic growth and surging inflation. Everything from crude oil to Big Tech stocks declined. Even traditionally safe havens like gold fell, weakening the US dollar against other major currencies.
Small-Caps, Retail, and Airlines Take Heavy Losses
Smaller US companies suffered some of the worst damage. The Russell 2000 index plunged 6.6%, more than 20% below its previous high, a threshold often used to mark a bear market. Consumer and travel-related stocks bore the brunt of investor concerns.
Best Buy lost 17.8% amid worries about supply chains reliant on global manufacturing. United Airlines dropped 15.6%, reflecting expectations that travel may shrink in a weakening economy. Target slid 10.9% as consumers faced renewed pressure from inflation.
Sean Sun, portfolio manager at Thornburg Investment Management, cautioned that “markets may actually be underreacting, especially if these rates turn out to be final, given the potential knock-on effects to global consumption and trade.”
However, he added that the announcement may be more of an opening move than an endpoint for policy.
Trump Downplays Impact as Fed Faces Dilemma
Despite the turmoil, Trump remained upbeat. “The markets are going to boom, the stock is going to boom and the country is going to boom,” he said. Comparing the economic jolt to a major surgery, he added, “We have an operation, like when a patient gets operated on and it’s a big thing. I said this would exactly be the way it is.”
Expectations are mounting as investors look to the Federal Reserve for possible rate cuts. Treasury yields dropped sharply, with the 10-year yield falling to 4.04% from 4.20% the day before. However, with inflation fears intensifying, the Fed’s ability to intervene aggressively may be limited.
Economic Data Sends Mixed Signals
Despite the market rout, the economic data published on April 3 provided some reason for caution rather than panic. A report showed fewer Americans filed for unemployment benefits than expected, pointing to ongoing labor market resilience.
Meanwhile, a separate survey indicated continued but weaker-than-expected growth in US service industries.
The report noted that the broader market mood remained grim, with nearly 80% of S&P 500 companies closing in the red.
Global Markets Mirror Wall Street’s Panic
The contagion spread beyond US borders. France’s CAC 40 dropped 3.3%, Germany’s DAX shed 3%, and Japan’s Nikkei 225 slid 2.8%. Hong Kong’s Hang Seng Index fell 1.5%, while South Korea’s Kospi declined 0.8%.
By day’s end, the damage was evident—the S&P 500 was down from 274.45 points to 5,396.52, the Dow Jones dropped from 1,679.39 points to 40,545.93, and the Nasdaq also slipped from 1,050.44 points to 16,550.61.
What comes next depends largely on whether Trump’s tariffs are here to stay or if this shock is just the beginning of a deeper negotiation.
