US Stock Futures Tumble as Trump Upends Global Trading Order

US stock futures plunged more than 3% after President Donald Trump outlined a slate of tariffs on US trading that raises the likelihood of a full-blown trade war that could plunge the US economy into a recession.

Author of the article:

Bloomberg News

Carmen Reinicke

Published Apr 02, 2025  •  5 minute read

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(Bloomberg) — US stock futures plunged more than 3% after President Donald Trump outlined a slate of tariffs on US trading that raises the likelihood of a full-blown trade war that could plunge the US economy into a recession. 

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Contracts on the S&P 500 fell 3.3% to 5,522 at 6:36 p.m. in New York, while Nasdaq 100 contracts sank 4.2%. Russell 2000 futures tumbled almost 5% Equity futures are subject to Chicago Mercantile Exchange limits that prevent gains or losses from exceeding 7% during the overnight session. 

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Trump said he will apply a minimum 10% tariff on all exports to the US starting and slap additional duties on around 60 nations with the largest trade imbalances. China will face a 34% rate, while the European Union will have a 20% levy and Vietnam will see a 46% duty. Evercore ISI puts the weighted-average tariff rate at 29%.

Shares of companies linked to sectors that will be hardest hit by the new round of levies were sharply lower in late New York trading. Nike Inc., Gap Inc. and Lululemon Athletica Inc. all fell at least 7%. They rely on goods and factories from Vietnam. Apple, whose supply chain is heavily dependent on China, fell as much as 6.9%. Chipmakers such as Nvidia Corp. and Advanced Micro Devices Inc. were down, as were multinationals Caterpillar Inc. and Boeing Co. 

“In the short term, this is bad,” said Kim Forrest, chief investment officer at Bokeh Capital Partners. “In the long to medium term, I’m hopeful that the people who are around the President have not let him shove us into some kind of recession.”

Economists have been warning for weeks that steep tariffs could cause inflation to rise and hurt US employment before any potential benefits show up. All across Wall Street firms have been raising the odds for a recession and ratcheting down their targets for where US stocks will end the year.

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“There’s a multi-stage, multi-party game being played,” said Vineer Bhansali, chief investment officer and founder of Longtail Alpha. “This is pretty negative globally because we don’t know what kind of game it is. Volatility should be higher and most people are going to be playing defense right now.”

Trump has been promising broad tariffs on many of America’s major trading partners since his re-election in November, but for five months has offered only a hodge-podge of announcements, reversals and delays that left Wall Street lurching from one headline to the next. He teased the April 2 announcement as far back as February.

Countries that account for the bulk of exports to the US have been planning retaliatory measures. The European Union is working on a package of potential emergency measures to support parts of its economy that could be hit hardest, according to people familiar with the matter. Canada’s Prime Minister Mark Carney said he’s prepared to move ahead with additional retaliatory tariffs. 

Treasury Secretary Scott Bessent urged US trading partners against taking retaliatory steps. “This is the high end of the number barring retaliation,” Bessent said. “As far as negotiations go — we’ll see.”

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“If this were to remain policy, it would entrench a new reality where the world would be permanently de-globalized,” said Marko Papic, chief strategist at BCA Research. “The period of adjustment would almost certainly require some form of a recession. There is clearly more downside ahead. We can easily be down another 10% after this.”

A drop of that magnitude would leave the S&P 500 on the precipice of a bear market after the index closed Wednesday 7.7% below its February record.

Wednesday’s barrage included a baseline 10% tariff rate globally with higher rates for specific countries, including a 46% rate for Vietnam, 34% for China, a 24% levy for Japan and the European Union facing a 20% tariff. USMCA-compliant goods from Canada and Mexico are exempt from the latest round of tariffs. 

Trump surprised investors last week by announcing a 25% levy on all automobile imports, which added to tariffs on many industrial metals. 

After an initial rally sent the S&P 500 to a record in February, the uncertainty caused by the administration’s gyrations on trade policy, along with signs that inflation remains stubbornly elevated and the economy is wobbling sent equities into a tailspin. The index spiraled into a correction over the course of 16 trading days, the seventh-fastest drop of 10% from an all-time high in data going back five decades.

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The CME trading limits will keep futures within a range of a range of 5,315.5 to 6,109. Trading will not stop, but orders outside of that band will not be fulfilled.

Writing before the Rose Garden announcement, a bevy of Wall Street firms said they expect more pain after markets notched their worst quarter since 2022. Goldman Sachs Group Inc. and Bank of America Corp., among others warned the policies, no matter the specifics, would deepen the selloff in equities. Three of Wall Street’s most-reliable bullish sell-side strategists have cut forecasts for the S&P 500 this year, though they still see the index ending 2025 higher than it is now. 

Without clarity on the goal of tariffs, it’s been difficult for traders to price risk, something that few see abating any time soon given the administration’s history of making statements and then swiftly pivoting or walking them back. 

Uncertainty “by definition, it’s not actionable information,” Don Calcagni, chief investment officer of Mercer Advisors, said. “You can’t quantify it, you don’t know where the administration is going to land.” 

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As Wall Street sifts through the latest on trade, investors are also preparing for a slew of economic data from March, including initial jobless claims Thursday and Friday’s nonfarm payroll report. 

Earnings season, which kicks off with big banks starting to report in mid-April, will also be telling. There are already signs that corporations are bracing for tariff impacts — last month, US companies announced the fewest stock buybacks in dollar terms since October 2020 after a blistering year of share repurchases in 2024, calling into question a key support of equity markets. 

“You’re going get a lot of guidance on what corporations are actually experiencing, you know, from consumers and what they’re doing with CapEx,” said Tony Roth, chief investment officer at Wilmington Trust Investment Advisors Inc. “That’ll be the next shoe to drop.” 

—With assistance from Natalia Kniazhevich and Jeran Wittenstein.

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