On April 3, 2025, the S&P 500 took a nosedive, closing at 5,396.52 after a staggering drop of 274.45 points, or 4.84%. This sharp decline, one of the steepest in recent years, came as markets reeled from President Donald Trump’s tariff announcements made during his so-called “Liberation Day” speech the day prior.
The “Liberation Day” event on April 2 unveiled a bold tariff plan, slapping a 10% levy on all U.S. imports, with steeper rates like 34% for China and 20% for the European Union. Tariffs on cars and car parts kicked in on April 3, fueling the market chaos reported by CNN Business.
Investors wasted no time reacting, with the S&P 500 shedding $2.4 trillion in value in a single day. This plunge, the worst since the COVID-19 market crash of March 2020, was tracked by Reuters.
Economists are sounding the alarm over the potential fallout. Nobel laureate Paul Krugman called the policy “full-on crazy” in a Substack post, warning of inflation and damaged global ties.
Former Treasury Secretary Larry Summers didn’t mince words either, dubbing the tariffs a “self-inflicted wound to the American economy.” He predicted price hikes in months ahead, as quoted in Politico.
The tariff escalation, the biggest since the 1930s, has sparked fears of retaliation from trading partners. Joseph Stiglitz, another Nobel winner, told The Century Foundation that it could be “very bad for America and the world.”
Consumer prices are already a concern, with the Cato Institute noting in CBS News that tariffs will hit U.S. households hard while benefiting only a few industries. The Tax Foundation estimates a $2,100 average tax increase per household in 2025, per its analysis.
Market unease mirrors broader economic jitters, with consumer confidence at a 12-year low. NPR linked this to fears of rising costs triggered by the new trade barriers.
The speed and scale of the S&P 500’s drop highlight how sensitive markets are to policy shocks. As the dust settles, all eyes are on how these tariffs will reshape trade and the U.S. economy.