Liberation Day Fallout: Trump’s Tariffs Trigger Market Meltdown
- Tyler White
- Apr 8
- 2 min read
All eyes were on Donald Trump last week with his “Liberation Day” sweeping tariff announcement on Wednesday, April 2nd. The US economy faced a significant shift from a stable growth trajectory to a heightened risk of recession. The announcement of the highest tariffs in over a century led to dramatic movements in the financial markets as well as economic indicators.
The aftermath of Trump’s tariff announcement saw the stock market plummet, the S&P 500 falling 4.8% on the first day and an additional 6% the following day. This rapid decline eliminated over $6 trillion in just two days.
The bond markets also showed volatility with the yield on 10-year Treasury Yield experiencing a significant drop. Initially it was around 4.2%, the yields nosedived to approximately 4.05% within 18 hours of the tariff announcement, reflecting a surge in bond purchases as investors desired a safer asset during stock market turmoil. The shift in investor sentiment to risk-aversion indicates a growing concern about a potential economic slowdown or even a recession.
JPMorgan increased the probability of a global recession from 40% to 60%. They now forecast a contraction of 0.3% in the US GDP for the 4th quarter of 2025, a notable change from the expected growth of 1.3%. This prediction is based on the expectation of negative effects of increased tariffs on household spending which drives a large 70% of US GDP.
The S&P 500 traded more than 5.5% lower heading into the close, putting it near the 7% intraday decline that’s needed to trigger a circuit breaker. There are three circuit breaker levels:
Level 1: The S&P 500 falls 7% intraday. If this occurs before 3:25 p.m. ET, trading is halted for 15 minutes. If it happens after that time, trading continues unless a level 3 breaker is tripped up.
Level 2: The S&P 500 drops 13% intraday. If this occurs before 3:25 p.m. ET, trading stops for 15 minutes. If it happens after that time, trading continues unless a level 3 breaker is triggered.
Level 3: The S&P 500 plunges 20% intraday. At this point, the Exchange suspends trading for the remainder of the day.
The international response has been equally severe, China retaliated by imposing an additional 34% tariff on all goods imported from the US. Trump’s fluctuating stance on negotiations, adds another layer of unpredictability that complicates strategic planning for both businesses and investors.
Trump’s “Liberation Day” tariffs have triggered a stark shift in outlook from solid growth to a risk of recession within a matter of days. All eyes will be on the market, as this upcoming week will be very important to the future of the world economy.
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