Markets spiral as Trump's tariffs ignite economic turmoil

The world is reacting increasingly strongly to the tariffs imposed by Donald Trump on most trading partners. The decision announced on Wednesday raised fears of a total trade war and global recession. The scale of the sell-off is comparable only to the onset of the pandemic in 2020.

The President of the United States, however, seems unfazed. While speaking with journalists aboard Air Force One, he stated that the introduction of tariffs is "going very well." He once again assured that he is open to "phenomenal" offers from countries that wish to negotiate lowering the new rates. Despite these assurances, markets reacted nervously.

So far, American companies are also significantly affected by the tariffs. The value of stocks listed on one of the key stock indices, the S&P 500, decreased by over $2.5 trillion on Thursday, marking one of the largest single-day drops since the pandemic.

Investors were in a state of panic. Five Below, a discount store chain, and Wayfair, a supplier of furniture and home furnishings, reported declines of 29% on Thursday. Giants like Ralph Lauren, Dockers (a brand owned by Levi Strauss), and Dell lost 17%. Nike fell by 12%, and Apple by 8%.

The onset of the new trade war triggered a chain reaction globally. Overnight, Japan's Nikkei fell by over 3%, South Korea's Kospi decreased by 1.5%, and the Australian index also plunged. Then it was Europe's turn, with nearly all indices plummeting, starting with Poland's WIG20 and continuing through Germany's DAX, France's CAC, Spain's IBEX, and Europe's Stoxx.

On Friday, this scenario repeated. The S&P 500 fell by 4.9% - to over 5100 points. The Dow Jones Industrial Average fell another 1,618 points, or 4%, after dropping over 1600 points on Thursday. European stock exchanges also experienced declines.

Banks, goods, and services retailers fear one thing - that consumers will cut back on spending if tariffs lead to higher prices for goods and services. Concerns are deepened by the fact that many economists described the tariffs introduced on Wednesday as much worse than expected. This is why airlines, most major footwear, and clothing manufacturers (who produce their products outside the U.S., meaning they will have to pay import duties on all their products sent back to the country for sale) are among the companies reporting losses.

Large retailers (who also import vast amounts of goods from outside the U.S.) are also suffering - on Thursday, Amazon lost 7% on the stock market, Target fell 9.5%, and Best Buy plummeted by as much as 14.8%. Technology companies are also facing problems. Apple lost 8%, HP fell 13.1%, and Dell dropped 15.4%. Nvidia, a giant in artificial intelligence, lost 6.3%. Concerns about a recession also affect bank performance. Wells Fargo lost 7.5%, Bank of America fell 8.9%, and JPMorgan Chase dropped 5.7%. The declines continued on Friday.

Somewhat surprisingly, the automotive manufacturers were not hit as hard as most other sectors. This may be because most of the steel and aluminum used by Ford, GM, and Stellantis already comes from the United States.

Hildegard Müller, president of VDA (Verband der Automobilindustrie), the German automotive industry association most exposed to the effects of tariffs on our side of the ocean, has no doubts that the U.S. decisions are harmful.

"It is already clear that the tariffs have a negative impact on the American economy. The consequences will be more severe; all sides will pay with lower growth and decreased prosperity," she explains.

The head of VDA admits that President Trump's motivation is not understandable. "Both the transatlantic partnership and free trade are of enormous importance to the economies on both sides. They are the guarantee of growth, prosperity, and maintaining jobs on both sides of the Atlantic," she adds.

In her opinion, Washington should take actions opposite to those announced on Wednesday. "It is lowering tariffs and trade barriers, not raising them, which is the key factor driving further investments. A factor ensuring new jobs in the United States. Export success and import are complementary. These are two sides of the same economic success. The U.S. and EU governments should cooperate to achieve this," Hildegard Müller indicates.

The association's president emphasizes that during President Trump's first term, the EU and the U.S. were able to reach an agreement on a trade conflict that also emerged at that time. "It shows that solutions can be found through negotiations, taking into account mutual interests," she emphasizes.

"The EU must now act, showing unity and strength. It must signal its readiness to negotiate. The risk of a global trade conflict, which will negatively impact the global economy, is really high," she concludes.

Trump's policies have also hit billionaires. The 500 wealthiest people in the world collectively lost $208 billion on Thursday. And that's in just one day. More than half of the people on Bloomberg's Billionaires Index saw their wealth drop, with an average decrease of 3.3%.

Thursday's drop was the fourth largest in the index's 13-year history and the biggest since the peak of the COVID-19 pandemic. Those most affected were those who stood in the front rows during Donald Trump's second-term inauguration.

Mark Zuckerberg, founder of Meta, suffered the most significant dollar losses. A 9% drop in the company's stock cost its CEO $17.9 billion, or about 9% of his fortune. Meta was the winner among the Magnificent Seven, the largest technology companies listed. From the beginning of the year to mid-February, it gained over $350 billion in market value. Ultimately, however, since mid-February, the giant's stock, led by Zuckerberg, has fallen by about 28%.

Jeff Bezos, founder of Amazon, lost $15.9 billion after the tech giant's shares fell by 9%. This was the most significant drop since April 2022. The company's shares are already more than 25% lower than their peak value from February.

Elon Musk, Tesla's CEO, whom some consider Trump's right-hand man, has already lost $110 billion this year, including $11 billion on Thursday.

Rich people from other countries are also losing. On Thursday, the fortune of Bernard Arnault, the richest man in Europe and owner of the LVMH conglomerate, was reduced by $6 billion net after his company's shares fell in Paris.

The Middle East was the only region where individuals listed in Bloomberg's wealth index increased their fortunes.

This market collapse has not yet translated into immediate price increases for average Americans. However, it directly blows their retirement funds, which depends on stock market performance. The massive drop in stock prices wiped out trillions of dollars from U.S. assets, directly affecting the value of the retirement savings of millions of citizens.

Analysts warn that tariffs will be reflected in consumer wallets through higher prices in the long run. Due to high tariffs, companies will pay consumers additional costs by raising product prices. Companies that heavily rely on imports, especially inexpensive products from Asia, which may now be subject to tariffs of up to 54%, will suffer the most.