President Donald Trump’s tariffs have sparked a fire in global stock markets.
Stocks closed lower for the third consecutive session on Monday (7), with President Trump threatening China with additional tariffs of 50%.
The Dow Jones Industrial Average fell 349.26 points, or 0.91%, while the S&P 500 dropped 0.23%. The Nasdaq Composite ended the trading session in positive territory, finishing up 0.1%.
China announced last week that it would impose its own tariffs of 34% on the U.S., set to take effect on Thursday, April 10.
“If China does not remove its 34% increase above its long-term trade abuses by tomorrow, April 8, 2025, the United States will impose ADDITIONAL tariffs on China of 50%, effective April 9,” Trump wrote in a post on Truth Social on Monday. “Furthermore, all talks with China regarding the meetings requested with us will be terminated! Negotiations with other countries, which have also requested meetings, will begin immediately.”
The trade war is on. Does this mean we are heading towards a recession?
The first thing to emphasize is that what happens in the stock market is not the same as what happens in the economy – a drop in stock prices does not always mean a bad economic situation in the future.
But sometimes it does.
Very large drops in stock market values, like these, mean that there has been a fundamental reassessment of future earnings for the companies that make up the world’s stock markets.
In short, what the markets expect is that the increase in tariffs will raise costs and, consequently, profits will fall.
What is a recession?
An economy is defined as being in recession when the total of everything we and the government spend or export decreases for two consecutive periods of three months.
There haven’t been many truly global recessions
The 1930s, the aftermath of the Great Financial Crisis of 2007/8, and the panic surrounding the pandemic are three rare examples of when we saw synchronized recessions in major world economies.
Economic analysts still consider it unlikely that we will see anything on that scale this time, but the chances of recession in the U.S., U.K., and European Union are significantly high.
Sources: BBC and Fox Business