$9 tn lost since Trump 2.0, US faces recession
Fears of an economic recession grow as investors and businesses grapple with the fallout of US President Donald Trump’s sweeping tariffs that have wiped out nearly $5 trillion from the American stock market within two days of the announcement.
The US markets have seen the wealth erode by $9 trillion after Trump’s January 20 inauguration as investors switch to the safety of government bonds.
Nasdaq has confirmed it is in a bear market, ending more than 20% below its record high close, while the prices of oil and other commodities have been in decline.
JP Morgan has predicted that the US economy will likely fall into a recession this year, largely due to the impact of the new tariffs. In a note to investors, it has said US’ gross domestic product is expected to contract “under the weight of the tariffs”.
Global stock markets have been in sharp decline with China announcing additional 34% tariffs on US goods, escalating a trade war that has spurred the biggest market losses since the pandemic.
Indian stock indices have slumped 2,100 points this week. Despite this, global brokerage firm Jefferies has offered a positive view regarding the impact on India. The firm has noted that key Indian export sectors, such as information technology services, pharmaceuticals, and automobiles, are not directly impacted by the new tariffs.
Jefferies has described the 26 percent tariff on India as “reasonable” when compared to the levy on other countries. However, it has cautioned that the broader economic slowdown in the US may still hurt Indian exports, especially in sectors such as IT services.
On the effect of tariffs on the US economy, Ajay Bagga, banking and market expert, says: “US markets have now lost over $9 trillion in market cap since the Trump’s inauguration. US imports are $3.3 trillion. US tariff revenues, even if all imports stay and even if tariffs are collected on all these imports, will be $600 billion. Imports will become costlier by 20 per cent on average. Demand will go down, and import volumes will shrink. So, $600 billion will not be collected. But the market cap loss of $9 trillion is real.”
A report by ASK Private Wealth has noted that the tariffs may lead to heightened economic uncertainty, potentially triggering stagflation in the US, where inflation remains high amid stagnant growth. “Impact: Higher uncertainty; chances of retaliation and rollback,” the report said.
Experts have warned that these reciprocal tariffs may raise trade barriers to levels not seen since the 1800s.
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