Donald Trump’s ‘all gas and no brakes’ approach to global import tariffs risks triggering a market meltdown not seen since the pandemic, analysts have warned. 

U.S. stocks suffered their most punishing single-day losses since the height of the pandemic in 2020, as President Donald Trump’s aggressive new tariffs triggered a wave of investor panic and economic downgrades.  

The Morningstar U.S. Market Index plunged 5.04% on Thursday, while the S&P 500 shed 4.84% and the Nasdaq fell nearly 6%. Technology and energy stocks led the rout, but the selloff hit nearly every sector, reviving fears of a recession just as the Federal Reserve considers its next move. 

At the heart of the chaos was Trump’s announcement of a 20% tariff on European Union goods, coupled with more severe trade barriers on imports from several Asian countries. The sheer breadth of the measures stunned analysts.  

“Trump 2.0 is all gas and no brakes,” said Michael Arone, chief investment strategist at State Street Global Advisors. “This is a far bigger magnitude, a far bigger scale, more aggressive. And investors today are selling first, and they’ll ask questions later.” 

Among the worst hit was the technology sector, with the Morningstar U.S. Technology Index tumbling 7.03%, its steepest loss since March 2020. Apple shares plummeted 9.3%, and Nvidia sank 7.8%. Consumer cyclical stocks also cratered, with Wayfair collapsing by 27% and Ford down 5%.  

Small-cap value stocks were decimated, dropping over 7%, marking their worst performance in nearly five years. The only corner of the market spared from carnage was consumer defensives, eking out a 0.17% gain as investors sought safety in recession-resistant sectors. 

Bond markets rallied sharply, with U.S. Treasury yields falling as investors fled riskier assets. The yield on the 10-year Treasury note dropped to 4.05%, its lowest level since October, as traders began betting that the Federal Reserve would be forced to accelerate interest rate cuts.  

The paradox is glaring: while tariffs are expected to slow economic growth, they could also revive inflation, trapping the Fed between two incompatible mandates. 

Analysts believe that tariffs may compel the Fed to shift its focus more decisively toward economic weakness, potentially paving the way for earlier rate cuts.  

But even that scenario is complicated. “The Fed has been trapped between supporting economic activity and fighting inflation, and unfortunately this news puts additional pressure on both,” one insider said. 

Wall Street economists were quick to revise their outlooks, with some estimating that the new tariffs would cut U.S. GDP growth by 0.5 percentage points in both 2025 and 2026.  

More troublingly, they warn that the long-term damage from this kind of abrupt trade policy shift could be far worse than immediate figures suggest.  

The broader implications are deeply uncertain. Some firms may pull back on investment, fearing that political turnover in 2026 or 2028 could reverse or further escalate trade policy.  

“This is really a worst-of-every-world scenario,” a senior analyst at Morningstar added, noting that if Congress had passed these tariffs, markets might have found stability in their staying power. Instead, they now face massive policy swings that make long-term planning nearly impossible. 

The dollar also weakened against a basket of global currencies, and gold surged to just below $3,200 per ounce, hitting a record as investors rushed into safe-haven assets.  

Across Europe, bond yields followed the U.S. downward as markets digested the global spillover effects of the U.S. shift toward protectionism. 

Trump’s trade shock has reignited fundamental questions about the sustainability of U.S. economic growth under renewed nationalist economic policy.  

While some had hoped his second administration might temper its more aggressive impulses, this week’s tariff escalation confirms that the White House intends to double down. 

With financial markets already jittery from elevated valuations, geopolitical risk, and AI-driven speculation, Thursday’s selloff may be less a one-day event and more a harbinger of a volatile, policy-driven market era. 

For risk professionals, the message is clear: economic assumptions grounded in global integration and trade stability are no longer reliable.  

The challenge now lies in recalibrating expectations, revisiting stress models, and preparing for a market regime where political decisions – not fundamentals – are the dominant risk factors. And in that environment, one tweet or tariff can shift the ground beneath the entire financial system.