In brief
Tech stocks and major indices drop significantly amid fears of rising prices and slowing growth.
The US stock market took a hit on Monday due to growing worries about the impact of the ongoing trade war. The S&P 500 fell roughly 2% while the Dow Jones dropped by 0.9%, and the Nasdaq plummeted over 3.5%. These declines followed President Donald Trump's vague comments about a “period of transition” for the American economy but avoided direct answers about potential recession or rising prices. Commerce Secretary Howard Lutnick assured that there would be no economic contraction, yet acknowledged the possibility of price increases for some goods. Investors fear that Trump's tariffs, newly imposed on imports from countries like Mexico and Canada, could lead to inflation. Investment manager Rachel Winter stated, “The level of tariffs that Trump is imposing… will have to cause inflation somewhere down the line.” Economist Mohamed El-Erian noted that optimism around deregulation and tax cuts may have overshadowed the looming trade war's consequences. Stocks like Tesla saw significant losses, dropping nearly 8%, while tech giants like Nvidia and Meta dropped by over 4%. In an interview, Trump indicated he hesitates to predict the economy's future but claimed he is “bringing wealth back to America.” The tariffs, however, have triggered retaliatory measures from affected nations, with China introducing new tariffs on US farm products.Lutnick pointed out that although foreign goods may become pricier, American goods should decrease in price, and reassured that “there’s going to be no recession in America.” While experts agree that the trade war might not spiral out of control, they believe that tariffs will still pose challenges for the US economy. Han Shen Lin from the Asia Group reiterated that both sides are demonstrating their resistance to backing down, emphasizing a shift in China's focus toward domestic growth.
