Even more alarming is that $5 trillion of those losses were incurred in just the last two trading sessions, after Trump announced sweeping new tariffs, the largest hike in over a century, sending global markets into a tailspin and tipping the Nasdaq into a bear market.
What began as a bold attempt to reshape America’s trade balance has rapidly escalated into a full-blown financial crisis, with economists now warning of a potential recession, soaring inflation, and a volatile policy environment that could define the rest of 2025.
While financial markets have endured numerous shocks in the past, from the COVID-19 pandemic to the 2008 Global Financial Crisis, the current turmoil stands apart. Unlike past collapses, this one is seen by many as avoidable.
Trump’s aggressive tariff policy has thrown global supply chains into chaos and dramatically soured investor sentiment. The Dow Jones Industrial Average plunged 2,231 points on Friday, its worst single-day loss since March 2020. The S&P 500 dropped 6%, shedding $5 trillion in value in just 48 hours, while the Nasdaq officially entered bear market territory, falling 5.8%.
If investors were hoping for a soft landing, they may be disappointed. Instead, economists are warning of a stagflationary environment—a toxic mix of slowing growth and rising prices.Global brokerage firm JP Morgan has now downgraded U.S. GDP growth for 2025 to -0.3%, from a previously estimated 1.3%- a seismic revision. Michael Feroli, the firm’s chief U.S. economist, predicts a two-quarter recession beginning in Q3, citing a 1% shrinkage in Q3 and another 0.5% in Q4.“The forecasted contraction in economic activity is expected to depress hiring and over time lift the unemployment rate to 5.3%,” Feroli wrote in a note to clients.
Also read: Trump’s ally Elon Musk lost $100 billion, but Warren Buffett gained. What’s he seeing that no one else is?This would mark a sharp increase from the 4.2% unemployment rate reported in March by the Bureau of Labor Statistics. Hiring, which had remained relatively strong, is now expected to decelerate rapidly as companies brace for shrinking margins and uncertain demand.
Feroli expects the core PCE inflation index to rise to 4.4% by year-end, up from 2.8% in February. The spike in prices, coupled with wage pressures and falling corporate confidence, could push the Federal Reserve into a policy corner.
The market turmoil has placed the Federal Reserve in a precarious position. Feroli expects the Fed to begin cutting rates as early as June, with up to four rate cuts possible through January 2026, lowering the benchmark rate to between 2.75% and 3%.
But not all policymakers are on the same page. Fed Chair Jerome Powell, speaking Friday, struck a cautious tone. “It feels like we don’t need to be in a hurry,” he said, signaling that the central bank will “wait and watch,” despite market pressure and political noise.
Beyond Wall Street, the ripple effects have been immediate. Oil prices collapsed for a second straight day on Friday. Brent crude futures plunged more than 6%, touching a four-year low near $62 a barrel, now down 26% year-over-year.
According to analysts, the sudden drop in global demand expectations is behind the commodity rout. With the U.S. and China—the world’s two largest economies—now engaged in a full-blown trade war, the outlook for industrial activity has dimmed.
What brokerages say about India?
Macquarie
Macquarie flagged the 26% blanket tariff on Indian products as “worse than expected,” warning that the blow could trim India’s GDP by 50 basis points.
Pharma exports, accounting for $12.2 billion (14% of India’s total U.S. exports), and automobile shipments (3%) are seen as most vulnerable. A bilateral negotiation effort is reportedly underway.
Jefferies
Jefferies took a more tempered stance, stating that Indian pharma stocks may rally in the near term as pharma-specific tariffs have been excluded—so far.
“Breathe easy for now,” the firm advised, though it did not rule out tariffs being introduced later.
Citi
Citi confirmed that the pharma sector is excluded from the initial tariff wave. “This aligns with our stance, where we’ve consistently assigned a low probability of tariffs on Indian pharma,” it said, while cautioning the arrangement may be temporary.
Also read: Berkshire refutes false claims linking Buffett to Trump-endorsed economic strategy
In conclusion
Whether this shock turns into a prolonged recession or a short-term reset depends on what policymakers and corporations do next. But for now, the market message is loud and clear.
“J.P. Morgan’s call stands as a stark warning—not just of recession, but of a deeper structural shift in America’s economic direction,” said one strategist.
With allies alienated, inflation rising, and Wall Street shaken, Trump’s tariff gamble has ignited more than just a trade dispute.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
