On 2 April 2025, global financial markets experienced significant volatility following President Donald Trump’s announcement of new tariffs. The announcement led to immediate and sharp reactions in the financial markets, reigniting concerns of a trade tensions and triggering broadened investor uncertainty. 

This article explores how the announcement and other contributing factors led to one of the recent market sell-off. 

Key Points  

• Trump’s announcement of new tariffs triggered a sharp global market sell-off, contributing to a significant decline in equity valuations. 

• Major indices dropped, with the Nasdaq entering a bear market and the Dow Jones Industrial Average posting record back-to-back point losses. 

• Some investors moved into what commonly considered as safe-haven assets like gold, bonds, and the yen, while crypto markets also saw sharp declines. 

What Led to the Stock Market Meltdown ^[1] 

On 2 April 2025, President Donald Trump announced a new tariff policy that imposed a flat 10% duty on all imports starting 5 April. Higher tariffs or what the White House called “reciprocal tariffs”, were set for countries with large trade surpluses (or “worst offenders” to use Trump’s words) with the US—34% for China, 20% for the EU, and 24% for Japan. The move aimed to rebalance trade, protect US industries, and encourage foreign companies to manufacture in America. 

The announcement  raised concerns of a renewed trade tensions among global investors. Markets volatility heightened as traders reacted to the scale and speed of the proposed tariffs, with no clarity on how long they would last. The uncertainty triggered a massive sell-off in stock markets, sending shockwaves through all global markets.  

Learn more about Trump’s reciprocal tariffs in our full article. 

How did the Stock Markets React?  

Global markets saw widespread declines, as investor sentiment turned sharply risk-off. Concerns over trade disruptions and economic uncertainty triggered sell-offs across all major indices. 

US Stock Market ^[2,3,4] 

US stock fell on 4 April 2025, as investors braced for more losses following President Trump’s new tariff announcement.  

• Dow Jones Industrial Average fell over 5.5% 

• S&P 500 dropped 6% 

• Nasdaq-100 rises by 5.8% 

This sharp drop followed a historic two-day market rout to end the previous week. The Dow recorded consecutive losses of over 1,500 points for the first time, including a 2,231-point plunge on Friday alone, which equated to a 5.5% drop. Meanwhile, the S&P 500 lost close to 11% in just two sessions, marking the third worst two-day sell-off this century, while the Nasdaq officially entered a bear market after falling 22% from its peak. 

Despite the sell-off, the White House stood firm on its tariff strategy. President Trump addressed the downturn on Sunday evening, saying, “I don’t want anything to go down, but sometimes you have to take medicine to fix something” ^[5]. Markets remain on edge following the policy shift, with volatility expected to remain high. 

Asia Market ^[6,7,8] 

Asian shares dropped sharply at the open on 7 April, extending the global sell-off linked to the tariff tensions and declines on Wall Street. Japan’s Nikkei 225 dropped nearly 9% in early trading, prompting a brief suspension before closing 7.9% lower at 31,136.58. The broader Topix index also fell 7.7% while South Korea’s Kospi experienced a trading halt after steep losses. 

The Nikkei officially entered bear market territory, having fallen over 20% from its December high. Selling pressure spread across the region, with Hong Kong’s Hang Seng index down almost 12% by the end of the session. In mainland China, where markets reopened after a public holiday, the Shanghai Composite and CSI300 fell more than 7%. 

In essence, investor confidence across Asia was negatively affected by the growing concerns of the global trade tensions. Tariffs here are higher than elsewhere potentially because these countries are very focused on exports to the US. This implies particularly impactful  to export-driven countries. The sharp escalation in tariffs and uncertainty around possible retaliation raised concerns of prolonged economic disruption. As a result, risk sentiment deteriorated sharply, leading to one of Asia’s most volatile trading sessions in recent years.  

Europe and UK Market ^[9] 

European markets opened sharply lower on 7 April, extending last week’s steep losses as Trump’s tariffs contributed to investors’ concerns fears. At one point, Euro Stoxx 50 futures fell over 6%, extending an 8% decline from the previous two sessions. Germany’s DAX index, broadly exposed to global trade, dropped 10% at the open, while France’s CAC 40 fell 6.6% and Italy’s FTSE MIB slid 5.7%. In the UK, the FTSE 100 shed 6%, to a one-year low of 7,566.  

VIX Index ^[10,11] 

The Cboe Volatility Index (VIX), which reflects expected market volatility, rose to 45.31 on 4 April—its highest closing level since April 2020 and climbed again on 7 April before parings gains.  

Often called Wall Street’s “fear gauge,” the VIX tends to rise during periods of market uncertainty. Experts note a VIX reading above 40 is typically associated with serious market stress, often linked to broader risks like credit issues or potential financial instability. 

The increase in volatility came as the S&P 500 dropped to an 11-month low and the demand for put options—commonly used to hedge against further losses—hit a record high.  

How Much Did the Stock Market Lose? ^[12,13,14]  

The US stock market has experienced a cumulative decline of $11.1 trillion in value since President Trump’s Inauguration Day, with tech stocks bearing a significant portion of the losses. With the announcement of President Trump’s reciprocal tariffs, global markets have reacted sharply. The policy shift took investors by surprise—while markets had priced in a modest 8.6% increase in tariffs for 2025, Trump raised them by nearly 20% on 2 April.  

This unexpected move triggered a wave of market selloff, contributing to a lose of  $6.6 trillion in value from the US stock market in just two days—the largest two-day loss on record. A group of companies commonly referred to as the  “Magnificent 7”—Apple, Amazon, Meta, Microsoft, Alphabet, Tesla, and Nvidia—lost a combined $1.8 trillion in value over just two sessions.  

• Apple: Down $533 billion 

• Tesla: Down $139 billion 

• Nvidia: Down $393 billion 

• Meta: Down $200 billion 

• Amazon: Down $265 billion 

• Microsoft: Down $165 billion 

• Alphabet: Down $139 billion 

Impact on Other Asset Classes ^[15,16,17] 

As equities declined, flows into the assets more commonly seen as the “safe-haven” assets increased, as some investors sort to manage risk and preserve capital. The Japanese yen and Swiss franc both appreciated over 3% against the US dollar, reflecting rising demand for currencies typically seen as stable during market stress. 

Meanwhile, bond markets saw an increase in demand, driving yields lower. The 10-year US Treasury yield fell 89bps to 3.87%, while Japan’s 10-year government bond yield dropped  to a low of 1.05%—its lowest level since December 2024.  

Gold rose to a record high following the tariff announcement, supported by escalating trade tensions, strong central bank demand, and a softer US dollar. Prices reached an all-time high of US$3,167.57 on 3 April, reflecting heightened investor demand for safe-haven assets.  

However, by 7 April, spot gold had pulled back 1.9% to US$2,981.09 an ounce—its lowest level since 13 March—leading some analysts to caution that gold may now be overbought in the short term. 

The pull-back also extended to cryptocurrencies, with Bitcoin falling 12% since the tariff announcement and dropping to a low of $74,700. The broader crypto market shed 9% of its total market cap, as investors pulled out of riskier assets. Major altcoins like Ethereum, XRP, and Solana posted losses ranging from 7% to 10%, underscoring the widespread shift away from risk sensitive assets. 

Market Outlook: What Lies Ahead 

Forex 

If there is no sign of a U-turn by President Trump on tariffs, risk-off sentiments may support demand for “safe haven” currencies, especially those in countries with large current account surpluses (so those not dependent on foreign capital). The markets may see outperformance in JPY and CHF until uncertainty eases.  

Emerging markets and commodity dollar currencies like AUD and NZD may also face uncertainty in this environment. The dollar may be vulnerable if the markets focus on the potential impact of tariffs on the US consumer. However, if in the event of any market dislocations , or if uncertainty eases, we may see a reversal of recent dollar selling. 

Commodities 

Oil, metal and agricultural commodities have all seen notable declines recently. Regarding crude, the decision from OPEC+ to increase supply in May by more than expected has contributed to the downward price pressure. The price drop may also mean there will likely be a swift slowdown in drilling activity in the US, depending on latest market conditions.  

Gold has experienced some selling pressure possible as investors liquidate positions recently to cover losses elsewhere, but an underlying bid from central banks should remain and continues to provide a degree of underlying support. The scale of the broader commodity complex sell-off may suggest that the market is pricing in a significant demand hit, amid growing concerns around global growth and recession risks. Much will depend on trade policy developments, particularly in terms of any potential tariff retaliation, and any negotiations that yield positive results and an easing in recession and demand concerns, especially regarding China.  

Bonds 

Tariffs are generally expected to increase prices, which can place upward pressure on Treasury yields. But initially, markets initially focused on the potential growth hit to the US economy and currently price in around four 25bps rate cuts for this year from roughly three before “Liberation Day”, with a 50% chance of the first in May ^[18].  

Consumer spending accounts for around 70% of the US economy, and if that activity stalls, that will have implications for jobs and the outlook. However, if inflation does start to rear its head, then bond prices may go lower and yields higher as interest rates are then predicted to be held high for longer. Yields could also go higher if investors adopt a ‘Sell America’ stance and shed their Treasuries,although this remains a hypothetical scenario and would likely reflect broader macroeconomic or geopolitical concerns. 

Indices 

Stocks have been seen notable declines as investors are uncertain about the scale and speed of tariffs and concerned about the recent trade tensions. Outright derisking took place on Friday ahead of the weekend with sharp position adjustments, followed by significant selling pressure  on Monday morning on the open of the Asian and European sessions, contributed to outsized moves across major induces.  

Market sentiment continues to be influenced by certain headlines related to trade policy, with investors watching closely for any potential reprieve or delay on tariffs from the Trump administration. Some commentators have speculated that a 20% correction from the record high in the S&P 500 (4,915) could prompt a policy response, though this remains uncertain. The 4,850 has been highlighted by some as a potential area of long-term technical support. Markets will also be closely monitoring the upcoming earnings season , with particular attention on corporate guidance and the potential impact of ongoing trade tensions. 

Some analysts suggest European markets may appear more attractive following the recent sell-off, as anticipated fiscal spending could support certain sectors. While equity valuations have declined and are now just above their decade-long lows, they remain within that range. However, if a broader structural shift is occurring, further downside may be possible — particularly if forward earnings face pressure from ongoing trade and tariff developments.  

Navigating Volatile Markets: Short-Selling in Uncertain Conditions  

The April 2025 market downturn highlights the deep interconnection of global financial markets in response to sudden policy changes. The sharp sell-off resulted in significant declines in stock market value, highlighting the global sensitivity from US trade policy shifts. 

In times of heightened volatility, staying informed and adaptable becomes essential. Understanding how markets react to macroeconomic shifts may present opportunities to trade Contracts for Difference (CFDs) for informed traders, which offer the flexibility to speculate on both rising and falling markets. That said, CFDs are also complex instruments and come with a high risk of losing money rapidly due to leverage. Retail investors should consider whether they understand how CFDs work and whether they can afford to take the high risk of losing their money. 

Open a live account with Vantage today to access dynamic market conditions and apply your trading strategies — but remember, trading CFDs involves significant risk and may not be suitable for all investors.  

FAQs 

Are we in a recession? 

As of 7 April 2025, the US economy is not officially in a recession. However, recent developments have heightened concerns among economists and financial institutions about a potential downturn. 

J.P. Morgan increased the probability of a US and global recession to 60%, up from 40% previously ^[19]. Similarly, Goldman Sachs raised the odds of a US recession to 45% ^[20]. While these projections indicate elevated risks, it is worth noting that a recession is typically defined by two consecutive quarters of negative GDP growth, which has not occurred to date.  

Is the stock market crashing? ^[21] 

The stock market has experienced sharp and rapid declines following the recent tariff announcements. On Thursday and Friday alone, the Dow Jones Industrial Average dropped a combined 3,910 points, marking the first time in history it has fallen more than 1,500 points on back-to-back days. Friday’s 5.5% drop was the Dow’s worst since the COVID-19 pandemic in June 2020. 

The S&P 500 fell 5.97% on Friday and 4.84% on Thursday, bringing its total two-day loss to nearly 11% and pushing it over 17% below its recent high. Meanwhile, the Nasdaq Composite dropped almost 6% on both days, and is now down 22% from its December peak, officially entering bear market territory.  

While these sharp declines are concerning, whether they constitute a full market crash will depend on subsequent market performance and broader economic indicators. Investors may wish to to monitor the situation closely and consult financial advisors for independent financial advice to help navigate periods of heightened volatility.​ 

Disclaimer: CFDs and Spreadbets are complex instruments and come with a high risk of losing money rapidly due to leverage. 67.9% of retail investor accounts lose money when trading CFDs and Spreadbets with this provider. You should consider whether you understand how CFDs and Spreadbets work and whether you can afford to take the high risk of losing your money.   

The information has been prepared by Vantage UK as of 14 April 2025 and is subject to change thereafter. The information is provided for educational purposes only and doesn’t take into account your personal objectives, financial circumstances, or needs. It does not constitute investment advice. We encourage you to seek independent advice if necessary.  

The information has not been prepared in accordance with legal requirements designed to promote the independence of investment research. No representation or warranty is given as to the accuracy or completeness of any information contained within. This material may contain historical or past performance figures and should not be relied on. Furthermore estimates, forward-looking statements, and forecasts cannot be guaranteed. The information on this site and the products and services offered are not intended for distribution to any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.    

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