Lexie Shadix, Campus Carrier deputy news editor
Feelings surrounding the second Trump administration can be described in one word: uncertain. That has been reflected time and time again since, and even before, Jan. 20, when he was inaugurated. More recently, this has been seen in the stock market.
After Trump’s announcement of high tariffs on April 2, the stock market experienced a significant downturn. The Dow Jones Industrial Average (DJIA) lost over 9 percent by April 4, and the Standard and Poor’s 500 (S&P 500) dropped 10 percent. The DJIA is a stock market index of 30 prominent companies listed on stock exchanges in the US, while the S&P 500 is a stock market index of the 500 leading companies listed on stock exchanges in the US.
“There’s a lot of uncertainty about tariffs,” Assistant Professor of Economics and Data Analytics Alex Marsella said. “There’s a lot of flip-flopping on the stated tariff policy of the administration. If heavy tariffs go into effect, then that will make production more costly, and it will slow GDP growth, slow revenue and profit growth for a lot of firms in the United States.”
On April 2, the White House released a fact sheet detailing Trump’s declaration of a “national emergency” created by foreign trade and economic practices. Using his authority under the International Emergency Economic Powers Act of 1977 (IEEPA), Trump enacted a 10% minimum tariff on all imports coming into the US, even from historical trading partners. This took effect on April 9.
“There’s still a blanket 10% tariff that the administration seems to be sticking to, which is pretty costly,” Marsella said.
The fact sheet also says that he will “impose an individualized reciprocal higher tariff on the countries with which the United States has the largest trade deficits.” Trump has been keen on imposing tariffs on many of the United States’ trading partners such as Canada, Mexico and China. Last week, Trump raised tariffs on Chinese goods to a whopping 145% and in retaliation, China increased its tariffs on US goods to 125% on April 11. According to Reuters, he announced a 90-day pause on duties on goods from other countries.
“When these heavy-duty tariffs across the board get announced, the stock market dips and then when the administration says, ‘You know what, actually we’ll pause most of the tariffs,’ the stock market recovers,” Marsella said. “We’re still below where we were at the beginning of the year.”
While the stock market constantly fluctuates, the swings have been significant these past few weeks.
“This is a bit more significant because this administration is playing around with a much more heavy-handed economic intervention than we usually have,” Marsella said. “We’ve had, ever since the Reagan administration, several decades of fairly open trade. This kind of uncertainty seems somewhat unique to this administration because of the kinds of tariffs that are being promised.”
Significant dips in the market are usually the result of panic selling. Stock owners see that the value of their stock is dropping, or anticipate it will drop, and try to quickly sell it, regardless of the potential for the market to recover.
While Trump has announced a 90 day pause on many of his tariffs, if they were imposed, it is likely that the stock market will continue to grow, but at a slower pace than without tariffs. If the tariffs were to be rescinded in the next administration, there would likely be a rapid increase in stock market values. If they are never put into place, only threatened, the stock market will still experience slow growth due to the uncertainty this will cause.
“Threatening [tariffs] is not as bad as [implementing] them, but the uncertainty reduces the demand for stocks because people are fearful,” Marsella said. “It creates what we think of as ‘bearish’ conditions.”
A bear market is one in which prices fall, and it encourages stock owners to sell. A bull market is one in which prices are rising and demand for stocks increases.
As of April 14, the DJIA is up 0.78 percent, while the S&P 500 is up 0.79 percent. On April 13, Trump granted exclusion from the steep tariffs on smartphones, computers, and some other electronics that are imported from China.
For those interested in investing in the stock market, it is not necessarily a “bad time” to invest. However, if one plans on needing money in one or two years, it is not advisable to invest in the stock market, no matter what the state is.
“I would not advise anyone to put money in the stock market if they think they’re going to need that money within the next couple of years, because anything can happen in the short run,” Marsella said. “It’s over long periods of time that average gains to the stock market is about 8 percent per year.”
For up-to-date information on the stock market, people can visit a variety of online sources, such as Reuters, MarketWatch or NASDAQ.