Trump Bump Fades as Markets Sink on Tariff Fears Ahead of Congressional Address
New York, March 4, 2025 — The stock market surge that followed Donald Trump’s reelection has vanished, replaced by growing fears of recession as his administration imposes sweeping tariffs on Canada, Mexico, and China.
On Tuesday, the Dow Jones Industrial Average plunged 670 points, marking a two-day decline of over 1,300 points. With this drop, all gains made since Trump’s second-term victory have been erased, turning the once-celebrated “Trump Bump” into a “Trump Slump.”
The market’s reaction reflects mounting concern that tariffs, once seen as a negotiating ploy, now pose a serious economic threat—comparable to the COVID-19 recession of 2020, which also occurred under Trump’s presidency.
Escalating Trade War Spurs Economic Fears
Despite continued projections for economic growth, recession worries are creeping back into forecasts. The uncertainty surrounding tariffs, coupled with ongoing efforts to downsize the federal workforce—led by billionaire Elon Musk—has shaken both consumers and investors.
Tesla, one of Musk’s most high-profile ventures, has seen its stock value plummet 42% since late December, losing billions in market capitalization.
The new tariffs impose a 25% levy on Canadian and Mexican goods (including a 10% tariff on Canadian oil) and double the existing tariffs on Chinese imports from 10% to 20%.
“These tariffs are, in effect, a self-imposed economic blockade,” wrote labor economist Joseph Politano in his Apricitas Economics newsletter. “It’s the largest disruption of U.S. trade in the post-World War II era, apart from the initial shock of COVID.”
Economic Indicators Flash Warning Signs
Signs of economic distress are already emerging. Consumer spending—a key driver of the U.S. economy—unexpectedly contracted, while construction activity weakened. As a result, the Atlanta Federal Reserve’s GDPNow forecast for Q1 has plunged from -1.5% to -2.8%, a stark contrast to the 2.3% growth recorded in Q4 of 2024.
The timing couldn’t be worse for Trump, who is set to deliver a prime-time address to Congress on Tuesday evening. Though he plans to highlight his economic strategy and claim victory in trade negotiations, the market turmoil could overshadow his message.
Global Retaliation and Rising Costs for Americans
While Trump has secured commitments to curb fentanyl shipments from Mexico and Canada, his trade policies have triggered swift retaliation. Canada has imposed a reciprocal 25% tariff on U.S. exports, while Mexico is preparing its own countermeasures.
These moves could significantly impact American consumers. Prices for vehicles, fresh produce, lumber, nickel, and energy imports from Canada and Mexico may surge, potentially reviving inflationary pressures.
Canadian Prime Minister Justin Trudeau condemned Trump’s tariffs as “a dumb thing to do” and announced $107 billion in retaliatory tariffs on U.S. goods. Trump fired back on Truth Social:
"Please explain to Governor Trudeau, of Canada, that when he puts on a Retaliatory Tariff on the U.S., our Reciprocal Tariff will immediately increase by a like amount!"
A Risky Political Gamble
Trump is betting that short-term economic pain will yield long-term gains for American workers. But if businesses struggle with higher costs and consumers pull back spending, the trade war could push the U.S. into recession—just as it did in 2018.
Jose Torres, senior economist at Interactive Brokers, warns that the affordability crisis could worsen as tariffs drive up the cost of everyday goods.
“One major risk of this ‘trade reset’ is that physical goods become too expensive for American families, dampening consumption and increasing recessionary pressures,” Torres said.
With Trump vowing additional tariffs on any country that taxes U.S. exports, the global trade conflict shows no signs of cooling—putting both the economy and financial markets on uncertain ground.