Market Sell-Off Deepens as Trump’s Tariff War Escalates, Analysts Fear Prolonged Stock Crisis

The U.S. stock market suffered another brutal sell-off on Monday, deepening a three-week downturn as investors grew increasingly anxious over the possibility of a recession—an outcome that President Donald Trump did not rule out in a weekend interview.

With Wall Street already on edge over tariff policy uncertainty, the situation took a turn for the worse as Trump imposed a 50% retaliatory tariff on Canadian steel and aluminum, escalating trade tensions with the country’s largest trading partner.

The S&P 500 plunged 2.7%, touching its lowest level since September before closing at 5,614.56. The tech-heavy Nasdaq Composite saw the steepest decline, plummeting 4%—its worst session since September 2022—to close at 17,468.32. The Dow Jones Industrial Average dropped 890.01 points, or 2.08%, finishing at 41,911.71.

The losses accelerated throughout the day before moderating slightly before the close. With Monday’s declines, the S&P 500 is now down 8.7% from its all-time high reached on February 19, while the Nasdaq Composite has lost nearly 14% from its peak, nearing official correction territory.

Trade War Escalation Raises Alarms

Investor anxiety was already running high due to ongoing uncertainty over the Trump administration’s tariff policies. However, markets were rattled further when the U.S. announced a 50% tariff on Canadian steel and aluminum imports, a move widely seen as retaliation against Canada’s 25% tariff on electricity exports to the U.S.

“Based on Ontario, Canada, placing a 25% Tariff on “Electricity” coming into the United States, I have instructed my Secretary of Commerce to add an ADDITIONAL 25% Tariff, to 50%, on all STEEL and ALUMINUM COMING INTO THE UNITED STATES FROM CANADA, ONE OF THE HIGHEST TARIFFING NATIONS ANYWHERE IN THE WORLD. This will go into effect TOMORROW MORNING, March 12th,” Trump announced on Truthsocial on Tuesday.

The tit-for-tat measures immediately raised concerns among analysts that the U.S. stock crisis is far from over. The retaliatory tariffs could push manufacturing costs higher, weigh on industrial output, and disrupt already fragile supply chains. The energy sector, which was already experiencing significant volatility, was also hit hard, with oil and gas companies among the biggest losers in Monday’s sell-off.

Tech Stocks Lead Market Collapse

The so-called “Magnificent Seven”, a group of big tech stocks that had fueled the market’s previous rally, led the decline as investors retreated to safer assets. Tesla suffered the worst blow, tumbling 15% in its worst single-day loss since 2020. Alphabet and Meta both fell more than 4%. Nvidia, a leader in artificial intelligence, slid 5%. Palantir, a favorite among retail investors, dropped 10%.

Recession Concerns Grow as Trump Shrugs Off Market Volatility

Fears of an economic downturn have been mounting over the past month, initially sparked by weak economic data that appeared to reflect business uncertainty over tariff policy. Those concerns were further fueled by comments from the Trump administration indicating that economic pain may be an inevitable consequence of its new policy direction.

Treasury Secretary Scott Bessent told CNBC on Friday that the U.S. economy may need to go through a “detox period” as the administration cuts federal government spending. Then, in an interview with Fox News on Sunday, Trump was asked directly about the possibility of a recession.

“What I have to do is build a strong country. You can’t really watch the stock market,” Trump said, suggesting that he is not prioritizing market stability.

His comments only added to market jitters, with analysts noting that uncertainty over fiscal and trade policy is weighing heavily on investor sentiment.

Adding to concerns, Goldman Sachs sharply lowered its U.S. economic growth forecast, citing the potential effects of escalating tariffs.

“We are in the throes of a manufactured correction,” said Sam Stovall, chief investment strategist at CFRA Research. “I say ‘manufactured’ because this is a direct response to the administration’s tariff programs—or at least the threat of them—and what kind of impact they will have on the economy.”

Foreign Markets Outperform as U.S. Equities Struggle

In an ironic twist, while U.S. stocks suffered, foreign markets—particularly in Europe—outperformed. Oppenheimer Asset Management noted the paradox in a client report, highlighting that despite Trump’s aggressive trade stance, foreign assets have been outperforming U.S. equities.

“Since the start of the year, global markets—particularly in Europe—have been faring better than the U.S. markets,” wrote John Stoltzfus, Oppenheimer’s chief investment strategist. “What’s ironic is that foreign companies are likely to suffer even more from the deployment of tariffs than U.S. firms.”

‘Muck-Around-and-Find-Out’ Policy Raises Red Flags

Economists are increasingly alarmed by what they see as an experimental and high-risk economic strategy from Washington. Dario Perkins, an economist at TS Lombard, was particularly blunt in his assessment. “I’m not turning bearish. I’m not even forecasting a recession,” Perkins said. “But it is odd to see U.S. policymakers talk as if they want to inflict damage on the economy, or at least do things that risk causing damage.”

He characterized the administration’s policy as a combination of aggressive tariff moves and drastic federal spending cuts, calling it a dangerous experiment. “This is something new,” he added. “It is ‘Muck-Around-and-Find-Out’ policy, to use the polite term.”

With trade tensions escalating, market volatility rising, and fiscal uncertainty mounting, Wall Street analysts believe the stock crisis is far from over. The extent of the damage will depend on whether Trump’s trade policies intensify—and whether any relief measures are introduced to stabilize investor confidence.