Stocks in the U.S. closed sharply lower last week, with investors reacting to new tariff announcements and global economic uncertainty. On Friday, all three major indexes posted steep losses for the second day in a row. The S&P 500 fell nearly 6% for the week—its worst performance since March 2020. This downturn follows President Donald Trump’s new tariff plan, raising concerns about inflation, global trade, and a possible economic slowdown.
Tariffs Spark Market Anxiety
President Trump announced sweeping tariffs on Wednesday. A 10% tariff now applies to all imports, with even higher rates—up to 34%—on goods from select countries, including China. These new measures take effect this month.
The move triggered sharp reactions in global markets. According to the Office of the United States Trade Representative, the tariffs impact over $3 trillion in global goods. U.S. consumers could see higher prices as import costs rise, leading to reduced spending and lower company earnings.
China responded Friday with its own 34% tariffs on American goods. China imported $140 billion worth of U.S. products in 2024. U.S. companies that depend on Chinese markets may now face weaker demand in 2025.
What This Means for Investors
The market is struggling to assess the long-term effects of these trade policies. Without clarity on how businesses will be impacted, investors remain cautious. Experts warn that the economy could slow down if confidence weakens and spending drops.
“If tariff talks drag on for months, and rates stay high, the chance of a recession grows,” said Mike Wilson, chief U.S. equity strategist at Morgan Stanley.
Some analysts believe that easing trade tensions could help. President Trump said Friday that he’s open to talks—if other countries offer terms that benefit the U.S. However, no deals have been made yet.
Key Economic Data Ahead
This week may bring clearer direction for the markets. The Consumer Price Index (CPI) for March will be released on Thursday. Economists surveyed by FactSet expect a 2.6% rise in prices over the past year. That’s slightly below February’s 2.8% reading.
“Anticipation of tariffs may have pushed up core goods prices early,” said economists at Nomura.
If inflation stays high, the Federal Reserve may delay expected rate cuts. The Fed wants to support growth but also needs to control inflation. A strong CPI report could complicate its plans.
Fed’s Response in Focus
Fed officials will speak next week, offering clues about their outlook. Among them are Fed Chair Jerome Powell, Vice Chair Michael Barr, and Governor Christopher Waller. Their remarks will come just after the CPI release, making them especially important.
Investors are watching closely. If the Fed turns more dovish or tariffs are rolled back, stocks could rebound. But without clear progress, the market may stay under pressure.
“We need either a softer Fed or fast progress in trade talks to see stocks move up again,” Wilson noted.
Jobs Data a Mixed Signal
The U.S. added more jobs than expected in March, giving a brief boost to market sentiment. Still, economists warn that hiring may slow in April as companies react to tariffs and rising costs.
Less hiring and weaker consumer demand could help bring inflation down. If that happens, the Fed may cut interest rates later this year to support the economy.
