Why Stock Market Crash after Donald Trump’s tariff hike

Donald Trump’s Tariff Hike Fear of Trade Wars & Global Economic Slowdown Tariffs (taxes on imports) are protectionist measures that can trigger retaliatory actions from other countries. When the U.S. imposed tariffs (e.g., on China, EU, and others), affected countries often responded with their own tariffs on U.S. goods (e.g., China’s retaliatory tariffs on soybeans, automobiles, etc.). This escalation raises concerns about a full-blown trade war, which could hurt global supply chains, reduce corporate profits, and slow economic growth.

Tariffs increase costs for companies that rely on imported materials, squeezing profit margins. Many U.S. manufacturers (e.g., automakers, tech firms) depend on foreign components—higher input costs can lead to lower earnings or price hikes for consumers. Investors worry about reduced corporate earnings, leading to stock sell-offs.

Sudden policy shifts (like unexpected tariff hikes) create unpredictability in trade relations. Due to unclear trade policies, businesses may delay investments, hurting economic growth prospects. Fear of slower GDP growth can trigger a broader market sell-off.

Companies like Apple, Intel, and automakers faced higher costs due to tariffs on Chinese imports. Tariffs on Chinese goods led to higher prices for items like electronics and clothing, squeezing retailers.

If tariffs contribute to inflation (by raising prices), the Federal Reserve might respond with higher interest rates to curb inflation. Rising interest rates can slow economic growth and reduce stock valuations, particularly for growth stocks.