Economic crisis ahead? How Trump’s trade wars are shaking markets
The largest US tech companies lost billions of dollars in one day (photo: GettyImages)
Stocks of major American corporations plummeted, Bitcoin dropped to its lowest levels, and the Wall Street fear index reached its highest level this year. The cause was a massive sell-off of assets on Monday, triggered by concerns over the economic policies of President Donald Trump.
To understand how severe the consequences are for the US and global economy, read the analysis by RBC-Ukraine journalist Alik Sakhno.
Contents:
Apple, Microsoft, Tesla, Nvidia, Alphabet (Google), Amazon, and Meta form America's Magnificent Seven. These technology market leaders are known for their influence on technology, consumers, and the economy. During Monday’s market crash, they lost over 750 billion dollars in market capitalization. Nasdaq saw its sharpest drop since 2022 due to concerns over new tariffs that could increase costs for companies reliant on imported components.
Another drop in US stocks
The decline on Wall Street began on the morning of Monday, March 10. All three major indexes opened with sharp losses. Throughout the day, US stock prices continued to fall, and despite a brief midday recovery, they closed in negative territory.
The Dow Jones index fell by 2.08 percent, though at one point, losses exceeded 3 percent. The broad S&P 500 index dropped 2.7 percent, while the Nasdaq Composite, which includes many technology companies, fell by 4 percent.
For the Dow and S&P 500, it was the worst trading day of the year, while Nasdaq recorded its biggest one-day drop since September 2022. This decline was a continuation of a difficult month for the markets, during which all three major indexes erased their gains made after the US presidential elections in November.
The assets sales are continuing after the S&P 500 index reached its highest point. The index closed 8.6 percent below its record high set on February 19. A key factor was the sharp decline in stocks that had initially surged after Donald Trump’s re-election. The mass asset sales were primarily driven by investors' concerns about the consequences of Trump’s tariff policies. The US President told American media on Sunday that the US economy is undergoing a transition period, and he did not rule out the possibility of a recession.
"So far, there is no factual evidence to confirm the beginning of a crisis or recession. Markets sometimes experience decline, and over the past three years, investors have gotten used to this, as it happens regularly. I emphasize that what we are seeing now is a phase of rebalancing, not a major crash. There are no significant declines in Europe or China. However, in the US, there is a reassessment of economic prospects in light of objective factors, including the aggressive changes introduced by the Trump administration. This is already affecting Americans’ confidence in the future," Artem Shcherbyna, Chief Investment Officer at Capital Times told RBC-Ukraine.
According to him, the US economy, which relies heavily on consumers, is particularly sensitive to such changes. As consumer confidence declines, people shift toward saving money to avoid potential financial difficulties in the future. He adds that any changes in American consumer behavior are immediately reflected in the stock market.
What to expect next from the US market
Artem Shcherbyna points out that the US technology index has fallen by approximately 4 percent since the beginning of the year. The main decline occurred in recent weeks, leading to billions in corporate market capitalization losses. In a single day, Apple lost $174 billion. Nvidia, a leader in AI chip production, was also hit hard, losing nearly $140 billion.
At the same time, Shcherbyna explains that the US stock market is the most expensive in the world. For example, the market capitalization of Nvidia alone was comparable to the entire stock market of the United Kingdom.
"This is a significant imbalance, which is now affecting the speed of the decline. Europe and China are not experiencing such sharp drops, so capital is shifting from the tech sector, which has grown significantly in the US, to more stable assets. Stocks, as an indicator, are among the first to react because these companies immediately reflect changes. A macroeconomic indicator, such as the unemployment rate, typically reacts last to emerging threats, if there are any," he notes.
Currently, there is a slowdown in job creation in the US. At the same time, the new administration is actively dismissing public sector employees. Artem Shcherbyna believes this could impact the unemployment rate by summer.
"If unemployment starts rising faster than expected, it will signal a significant deterioration in the US economic situation. This would prompt decisive action from the Federal Reserve, including a potential interest rate cut. As usual, America may attempt to save itself with tools that increase financial system liquidity, such as issuing new bonds. This is a highly probable scenario that we will likely see unfold," says the Chief Investment Officer.
Shcherbyna emphasizes that US inflation remains stable for now, although there are certain risks of an increase, which raises the likelihood of a Federal Reserve interest rate hike.
"Fundamentally, the Federal Reserve should remain as independent from politics as possible. However, losing independence becomes inevitable if, for example, unemployment surges. The two key indicators the Federal Reserve focuses on are inflation and unemployment. If joblessness starts rising, the Federal Reserve could begin a rate-cut cycle, possibly as early as May. Currently, the market expects such actions no sooner than June. However, if Trump's rhetoric and policies remain unchanged, the trend toward economic deterioration will intensify, making the Federal Reserve response unavoidable," Shcherbyna concludes.
Trump has repeatedly threatened significant tariffs on imports from Canada and Mexico but later announced a postponement until April 2. He has also doubled tariffs on all Chinese imports from 10 percent to 20 percent, while a 25 percent tariff on steel and aluminum imports is set to take effect on March 12. Additionally, last week, the President threatened to impose a 250 percent tariff on Canadian dairy products and extremely high tariffs on lumber. In a Sunday interview with Fox News, Trump stated that tariffs could increase over time. All these measures directly impact the stability of the stock and cryptocurrency markets, creating additional uncertainty for investors.
Meanwhile, the US dollar is losing value both in Ukraine and in global markets. The primary reason for this is also the policies of the US President.
Sources: an exclusive comment from Artem Shcherbyna, the Chief Investment Officer at Capital Times, as well as the material from CNN, The Times of India, Fox News, and Bespoke
