Stock Market Bloodbath: Tariffs turmoil, trade tumult, loss of trillions- Is Donald Trump steering world toward recession?

As the carnage at the share markets across the world on April 7, 2025, proved to be Black Monday, US President Donald Trump, Treasury Secretary Scott Bessent and the US Trade Representative Jamieson Greer may take a lesson or two from the unprecedented bloodbath. A loss of Rs 19 lakh crore in India in one session and $6 trillion over two days in the US must have sent not only the shock waves to the business community. but also signaled to the investor community that the world economy has been pushed to a sure recession.

Does stock market signal world recession?

As it is amply clear that the bloodbath is the direct and immediate result of the announcement of reciprocal tariffs ranging from 10% on the UK to 54% on China. The economists from JP Morgan and others have said in the most unequivocal terms that the possibility of a recession is as high as 60%. 

Will world supply chain be disrupted?

The steep fall in the stock market across the world has also indicated a declining confidence in corporate earnings. Indian companies like TCS and US firms like Apple, Nike, or automakers like Tata Motors and the US firms like Stellantis, who face higher input costs, have suffered the brunt of the onslaught on Monday. It is clear that the new tariff regime may not only kickstart a spate of retaliatory tariffs but also lead to fall of US exports. This may cause widespread layoffs, reduced investment, and a broader economic contraction.

Stock market bloodbath may begin negative feedback loop

It is clear that continued mayhem at the stock market will most likely trigger a negative feedback loop. Declining confidence will lead to less spending and investment, which may further weaken the economy. The vicious circle will keep on rolling. It has been proved by recent reports of falling consumer sentiment and businesses pausing operations. 

Will US inflation soar?

The carnage taking place across the world, including Wall Street, also indicates that as the tariffs increase the cost of imported goods, which is passed on to the consumers, it could reignite inflation. The US economists have already expressed apprehension of a 2% rise in the Consumer Price Index. As the higher prices might erode purchasing power, it may further push the consumer-driven economy.

Will Donald Trump change policy?

Will the bloodbath force Donald Trump to change or dilute his policy of reciprocal tariffs? Analysts believe the carnage in the stock market may not sway Trump directly. He has already dismissed short-term declines as a "period of transition" and a dose of "medicine to fix something". 

However, it could intensify criticism from political opponents and even allies. It may be understood by the fact that Senator Rand Paul has expressed concerns. Further, as the economic damage mounts and job losses and inflation soar, the public in general and lawmakers in particular may put pressure on the Trump administration to beat a retreat. 

Narrative may change, tariff policy may backfire

Though the US President may downplay the impact of the stock market bloodbath, it can not be denied that Donald Trump's success has been dependent on stock market performance. He cited stock market gains as proof of his economic prowess during his first term. 

If the downturn in the stock market prolongs, it will pose a challenge to him. He promised a “boom like no other” in his second term. His narrative that "short-term pain will yield long-term gains" will suffer. It may backfire if the economy enters recession.

Donald Trump's political problem may soar

If the stock market remains down and the US economy falters further, it may create political problems for Donald Trump and he may be forced to take some corrective steps before the 2026 midterm elections.

Donald Trump and his team have argued that the policy of reciprocal tariffs will revive the manufacturing sector and create jobs. However, if the opposite happens, voters, even his core supporters, may get frustrated, and it may get reflected in the elections.