Recession fears mounted as the global trade war escalated following a series of US tariffs and retaliatory measures taken by China and Canada last week. Wall Street tumbled on Monday, with the tech-heavy index Nasdaq shedding 4%- the biggest single-day loss since 2022- wiping off $1.1 trillion (€710 billion) in market valuation.
The Magnificent Seven stocks led the broad market decline, as US President Donald Trump’s aggressive tariffs raised concerns over profit margins, increasing price barriers for tech giants. “The markets are now also contending with the risk of weaker earnings from slower growth and eroded margins from the higher costs created by tariffs,” Kyle Rodd, a senior market analyst at Compital.com Australia, wrote in an email.
Among these big US tech stocks, Tesla is the biggest loser, plunging 15% on Monday. The electric vehicle maker’s stocks more than halved from its all-time high in mid-December last year, erasing all the gains, partially due to a backlash caused by CEO Elon Musk’s political evolvement.
In the first two months, Tesla’s EV sales plunged 71% in Germany and 44% in France. Meanwhile, its autonomous driving may face a delay in receiving approval in China due to trade conflicts with the US. The investment bank UBS has downgraded the outlook for Tesla’s car deliveries for 2025.
Other big tech names, including Nvidia, Apple, Microsoft, Alphabet, Meta Platforms, and Amazon, all fell between 2% and 5%. In the S&P 500, the technology sector fell more than 4%, leading to a 2.7% slump in the benchmark to a nearly six-month low. The Dow Jones Industrial Average slid nearly 900 points, or 2.08%, erasing all the gains since Trump won the election.
During an interview with Fox News on Sunday, Trump acknowledged that the US economy may be “in a period of transition” when asked if he was expecting a recession this year. “I hate to predict things like that,” he said, “There is a period of transition because what we’re doing is very big. We’re bringing wealth back to America.” He also hinted at the possibility of higher tariffs following the implementation of reciprocal tariffs on 2 April.
At a joint address to Congress last Tuesday, Trump downplayed the potential economic and market impact of his tariff policies: “There’ll be a little disturbance, but we are okay with that. It won’t be much.”
However, market participants are expecting a significant economic impact from a widening global trade war. Bond traders are now betting on a sooner Fed rate cut in June this year, much earlier than previously projected September. The interest rate-sensitive 2-year US government bond yield fell 13 basis points to 3.86%, the lowest since October 2024.
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