The energy, technology and consumer discretion departments achieved the most intense hits with around 7% losses. Industry and finance fell by about 5%.
US stocks fell sharply on April 3 after President Donald Trump imposed sudden tariffs on many countries in his White House Rose Garden address on April 2, citing a new era of US trade policy.
In the weeks leading up to the tariff announcement, the market was already facing significant volatility, with some people believing that the actual risks were exaggerated.
Trump said financial markets will take off once the new taxes take effect.
The president briefly told reporters before heading to Florida that he would also enter the United States, including $7 trillion from domestic investments.
“The market will be booming,” he said, adding, “The country will be booming.”
He said other countries have “used us for many years.”
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The Dow Jones industrial average, an index of blue chip stocks, fell more than 1,600 points on April 3rd. The technology-rich Nasdaq composite index fell by nearly 6%, while the broader S&P 500 fell by 4.8%.
The Russell 2000, a benchmark average for around 2,000 small-caps, fell 6.5%. It was the first US stock index to fall into the bear market, down more than 20% from its record-high closure on November 25th.
Small caps typically have market capitalizations between $300 million and $2 billion, making them even more unstable amid the worsening economic situation. With the growing fear of a tariff-driven recession, these stocks could be more sensitive to changes in trade policy.
Sector sees loss
Aside from consumer staples, all major S&P sector indexes were soaked on April 3rd.
The energy, technology and consumer discretion departments achieved the most intense hits with a loss of around 7%. Industry and finance fell by about 5%. Materials and real estate fell by 4% and 3% respectively. The health and utility sector fell by about 1%.
Stoyan Panautov, founder and CEO of California-based Babylon Wealth Management, told The Epoch Times.
“I think the market was very shocked and confused,” he said. “The tariff levels of our trading partners and allies are incredible.”
After flirting for $3,200 early in the week, Gold also took part in selling the wider market.
Gold prices have fallen from $38.10 (1.2% (1.2%) in the COMEX division of the New York Commercial Exchange to $3.128 per ounce. Yet, yellow metal has risen over 18% this year and 36% over the past 12 months.
Traditional safe haven assets benefit greatly from investors seeking shelter amid the market turmoil. Gold prices have also risen due to US Treasury yields and weakening of the US dollar.
Gold is usually sensitive to interest rate fluctuations. Because it can affect the opportunity cost of holding non-dirty bullion. On the other hand, lower greenbacks are bullish for gold as they are cheaper for foreign investors to buy.
Meanwhile, crude oil prices are falling.
The crude rushed after eight important OPEC+ producers in Algeria, Iraq, Kazakhstan, Kuwait, Oman, Russia, Saudi Arabia and the United Arab Emirates (UAE).
“The gradual increase along with evolving market conditions could be suspended or reversed. This flexibility allows the group to continue to support the stability of the oil market,” the Oil Exporting Countries (OPEC) organization said in a statement.
According to energy market analyst Phil Flynn, the market is underestimating Trump and his resolve. However, he said Americans are likely to benefit from the cheaper prices at gas pumps.
“President Trump has imposed tariffs on various countries, but exempts them from importing oil, gas and sophisticated products,” he said in the report. “This exemption reflects his commitment to keeping Americans energy prices low.”
Some analysts have suggested that for people with a long-term perspective, this may be the ideal time to invest in the market.
“If your time horizon is five, ten or twenty years, this will be a great buying opportunity,” said Panayotov.
Charles La Rosa, an investment analyst at Gabelli Fund, believes that small caps are below the larger ones, but there is an opportunity to own small caps, especially in the current climate.
“Smallcaps are poised to benefit from some important trends,” Larosa said in a memo sent by email to the Epoch Times.
“The repurchase efforts have brought manufacturing and supply chains back to the US, boosting local businesses.”
A decline in the interest rate environment could also strengthen small-cap stocks.
New trade policy
Trump imposed a 10% baseline tariff on all imports on April 5th. Some trading partners pay this fee only, including the UK, Singapore, Brazil, Australia, New Zealand, Turkey, Colombia, Argentina, El Salvador, United Arab Emirates, and Saudi Arabia.
Nearly 60 countries listed as “worst criminals” face higher mutual tariffs due to significant trade barriers, including high tariffs on US goods, non-tariff barriers such as currency manipulation and value-added tax (VAT).
These duties will come into effect on April 9th.
Trading partners that created the “worst criminals” list include the European Union (20%), China (54%), Vietnam (46%), Thailand (36%), Japan (24%), Cambodia (49%), South Africa (30%), and Taiwan (32%).
“The initial estimates of the mutual trade order suggest that if the new tariff rates last for a considerable period, then at the highest level since the 1930s, the US tariff rate could rise to the 25-30% range,” an analyst at Deutsche Bank wrote in a memo.
Analysts warned that these new measures will reduce economic growth by 1 to 1.5 percentage points this year, significantly increasing the risk of a recession, while also bringing similar increases to core PCE inflation.
In an interview with CNBC, Commerce Secretary Howard Lutnick said these new tariffs would force other countries to lower trade barriers to US goods.
“This is a fair trade sort,” he said on April 3rd.
“We hope that most countries will really start to investigate trade policies towards the United States and stop choosing us,” he added. “Stop saying we can’t sell corn to India, stop saying we can’t sell beef anywhere.
Global Market Tank
European and Asian markets responded in a similar way.
Japan’s Nikkei 225 fell 990 points, or 2.77%. Hong Kong’s Hang Sen index was erased 352 points (1.52%). The Kospi Composite Index in Korea fell by 0.8%.
Germany’s DAX fell 673 points, or 3.01%. London’s FTSE ran 133 points, or 1.55%. The French CAC 40 index also fell 260 points, or 3.31%.
Canada was absent from the list of baseline and higher mutual tariffs, but the TSX compound index fell by more than 900 points, or about 3.7%.
According to Jeff Buchbinder, chief equity strategist at LPL Financial, next week could be a real test of the financial markets as the highest tariff rates will take effect on April 9th.
“Supports should stabilize once negotiations begin to pay off and lower fees, assuming it is clear to the market that meaningful tariff rates will not rise further due to retaliation,” Buchbinder said in an emailed note to the Epoch Times.
Following the president’s announcement, Treasury Secretary Scott Bescent appeared on multiple news programs, delivering the same message urging the country not to engage in retaliation.
“Don’t retaliate my advice to all countries now. Let’s sit down, take it in and see what it will turn out, because if you retaliate, there will be escalations.
Tom Essaye, president and founder of Sevens Research Report, does not believe tariffs will lead to “bearish game-changers.”
“This is because the administrative authorities have accepted negotiations and have shown various exemptions, including all USMCA compliant products, tips from Taiwan, and drugs from Europe (drugs).”
“While the announcement of tariffs was not the worst case scenario (that would happen if there were no hopes of global tariff reductions), it would be progressively negative and should be predicting more market volatility in the near future.”
The reaction is mounted
The U.S. Chamber of Commerce said in a statement that businesses believe these broad tariffs are tax increases that raise consumer prices and weighs the outlook for economic growth.
“It urges policymakers to instead focus on accelerating the growth agenda to expand current tax policies, reorganize regulations and unlock the full potential of America’s energy.
Bradley noted that the White House should consider negotiating new trade deals to enhance access to American companies that “help more American jobs and lower prices.”
The Business Roundtable agreed to Trump’s efforts to win better trade deals that could lower tariffs and increase market access.
“But universal tariffs in the 10-50% range risk significant harm to American manufacturers, workers, families and exporters,” Joshua Bolten, CEO of Business Roundtable, said in a statement.
“Damages to the US economy can increase as tariffs increase and can be exacerbated by retaliation measures.”
Ed Yaldeni, economist and president of Yaldeni Research, increased the odds of a recession or bull event to 45% from 35% on March 31st.
“The liberation day festival at Rose Garden yesterday began a free fall in stock prices to raise the fear of a trade war,” Yadeni said in a memo.
“The worst-case scenario is a recession when high tariff rates lead to slowing down business and consumer spending that lead to layoffs.”
Kevin Dempsey, president and CEO of the American Iron and Steel Institute, praised Trump’s initiative to restore fairness and address non-tariff trade barriers.
“The global overcapacity of the steel industry, driven by subsidies and other trade differences practices by foreign governments, reached 573 million tonnes in 2024, spurring high levels of steel exports from countries such as China, Japan, South Korea, Vietnam and Indonesia.
