Global Stock Markets Turmoil | Trade Tariffs and Recession Fears
BY TIO Staff
|abril 9, 2025Global stock markets experienced urgent selling pressure at the start of trading this week, due to escalating tensions revolving around trade tariffs.
The U.S. administration's new tariff policies have triggered repercussions across international markets and traders are trying to navigate a volatile environment characterized by rapid price declines.
Why tariffs are disrupting the markets
Tariffs essentially function as taxes on imported goods and increase costs that are usually passed on to consumers as higher prices.
Higher tariffs can lead to a decrease in trade between nations because imported products become more expensive and less competitive compared to domestically produced goods.
This can lead to reducing global trade, slowing down or impeding economic growth and decrease consumer spending power.
The U.S administration has implemented its largest ever tariff increases on Chinese imported goods, affecting nearly all products imported from China. At the time of this writing, the tariffs on imported Chinese goods were as high as 104%.
This is not limited to China, as there are over 60 nations or trading blocks that could be significantly affected by the new strategy. Including traditional allies and trading partners, such as the European Union and Japan.
Those most affected by the U.S administrations new tariff strategy are also taking reciprocal measures to try and minimize the economic impacts.
The impact of tariffs on global markets
Asian stock markets opened this week with significant selling pressure. The Hang Seng Index (HK50) experienced a major gap down and fell by more than 13% on Monday, seeing its worst single-day decline since 1997.
The effects were felt elsewhere across the region too. As the selling intensified, circuit breakers were triggered in multiple Asian markets to temporarily pause trading activity, in an attempt to stabilize a day marked by historic losses.
The situation in Europe was similarly negative, the FTSE 100 (UK100), the DAX (DE30) and the Euro STOXX 50 (STOXX50) indices experienced substantial selling pressure as soon as the European markets opened. Germany's DAX was down over 7% at one point on Monday, recording its worst day of trading since 2020.
In U.S markets, the Dow Jones Industrial Average (DJ), the Nasdaq Composite Index (NAS) and the S&P 500 continued last weeks downturn and entered bear market territory. Over $1.55 trillion in value was erased from tech stocks and over $5 trillion from the S&P 500, which briefly extended to over a 20% decline from all time highs at one point.
Market outlook
This week's global stock market activity reflects the fears of protracted trade tensions as well as the uncertainty related to the broader economic impacts.
Economic forecasts have been adjusted by Goldman Sachs, who have increased the probability of a U.S. recession, while JP Morgan predicts an economic downturn is likely. In the UK, KPMG has downgraded economic growth expectations, forecasting a 0.8% decline this year.
Traders and market analysts will be closely monitoring central bank responses to the market turmoil, particularly from the U.S. Federal Reserve, and anticipate rate cuts to mitigate recession risks and stimulate economic activity. However, while lowering interest rates may stabilize sentiment and provide some short term relief, this could also signal the deeper economic challenges ahead. Additionally, there are short and long term ramifications of doing so, including adding to inflationary pressures.
Approximately 85% of U.S. companies are set to report earnings in the coming weeks, so there will also be a focus on corporate performance and guidance.
The fundamental near term market outlook is negative and remains uncertain. Tensions revolving around trade tariffs will continue to unfold and traders should be prepared for escalations and market volatility.
Will the selling pressure continue?
Technically, the Dow Jones Industrial Average (DJ), the S&P 500 and the Nasdaq composite index (NAS) entered bear market territory this week.
Looking at the weekly chart of the Dow Jones, price has created a double top around the 45,000 mark and has broken through a key short term support level around 41,500.
Looking at the Relative Strength Index (RSI), it may be signalling that the market is close to being oversold, so short to medium term price corrections are possible.
Traders will be watching closely for clues whether the 37,000 price area will hold as support. The next significant support levels are around the 34,500 and 32,500 mark. While the next significant resistance levels are around 40,000 and 41,500, where traders will be watching closely to see whether the selling pressure resumes.
Traders can expect market volatility and while the current environment presents significant opportunities, uncertainties remain, creating significant risks. It is important to remain vigilant and prepared for various scenarios and adjust trading strategies accordingly.
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