Source: Golden Ten Data.

Trump announced that he will start imposing widespread reciprocal tariffs and additional tariffs on specific industries on April 2.

On Sunday local time, Trump said to reporters aboard Air Force One, "In certain cases, 'two' taxes will be imposed on foreign goods imported into the USA. They charge us, and we charge them, and in addition to that, we will impose additional tariffs on Autos, Steel, and Aluminum."

This statement indicates that, despite the initial measures disrupting financial markets and straining alliances, Trump still plans to advance a more aggressive tariff system.

Trump previously stated that his administration is preparing to impose what he calls reciprocal tariffs, which are tariff rates calculated based on the tariff and non-tariff barriers of the home country on imported goods from various countries. However, he has also stated that he wants to prepare for key industries in the USA, including Autos, Steel, Aluminum, Microprocessor, and Pharmaceuticals. It is still unclear whether these industry tariffs will be included in the reciprocal tariff system or if they will be additional tariffs on top of that.

Trump said, "April 2 is the day of liberation for our country. We want to take back some wealth that has been sent out by very, very stupid presidents because they didn't know what they were doing."

Trump has imposed a 25% tariff on Steel and Aluminum. He also announced a 25% tariff on goods from Canada and Mexico but later granted a one-month extension for goods under the North American trade agreement (i.e., USMCA) negotiated during his first term. Trump also stated that Canada's Energy and potash (a crucial fertilizer) would only be subject to a 10% tax.

For many Americans, the era of 'one-time' investments has just come to an end.

The chaotic tariffs and government budget cuts of the Trump administration shocked many ordinary investors, leading them to withdraw from the USA stock market in favor of investing in Cash / Money Market, Bonds, Gold, and European defense stocks. The S&P 500 Index has maintained an impressive increase but fell into a correction Range last week, as Wall Street fears the economy is sliding into recession.

A survey by the American Association of Individual Investors shows that the proportion of investors bullish on the USA stock market is currently at its lowest level since September 2022. Of course, many have not changed their investment portfolios but are following standard financial advice to avoid making hasty decisions during market turbulence.

People's economic outlook is also closely related to their political leanings. Some Trump supporters say they are not worried and are even looking for buying opportunities. However, this is a sudden shift, as in recent years, it was easy to believe that the stock market would continue to rise due to a strong economy.

According to data from the Investment Company Institute, individual investors added a net $30.4 billion to Money Market Funds in the seven days ended March 5, marking the largest increase in over a year.

At the same time, according to Morningstar data, net inflows into USA physical Gold ETFs exceeded $5 billion in February. As of last Tuesday, investors had further inflowed $1 billion this month. Gold prices broke through $3,000 per ounce for the first time last week.

Others are looking overseas. Data from the London Stock Exchange Group shows that last month investors invested $1.8 billion in European stock ETFs registered in the USA.

In the first few months of 2025, the international market outperformed the USA stock market. The Stoxx Europe 600 Index has risen 7.7% year-to-date, the DEGUODAXZHISHU has increased by over 15%, while the S&P 500 Index has declined by 4.1%. Some believe that there are signs of a crisis in the USA market, while others think there is no cause for concern.

The decline in the stock market threatens the pillars of the USA economy.

USA consumer spending is highly dependent on the wealthy, who in turn heavily rely on the stock market. Investors are concerned that the White House's aggressive and rapidly changing tariff war could undermine a soft landing for the economy. Sentiment has turned gloomy, but the market shrinkage may just be the beginning of a chain reaction that could cause more collateral damage.

Harvard economist Gabriel Chodorow-Reich estimates that, holding other conditions constant, a 20% decline in the stock market in 2025 could reduce this year's economic growth by as much as one percentage point. As of last Friday's close, the S&P 500 Index has fallen 4.1% year-to-date in 2025.

A decline in stock prices could withdraw two major engines of the recent prosperity in the USA: strong household spending and corporate capital investment.

"In an economy as super-financialized as the USA, asset prices can lead the economy, and a decline in asset markets poses risks of weakening conditions in the real economy," said Alex Chartres of the UK fund management company Ruffer.

According to Moody's data, the top 10% of earners in the USA now account for about half of all spending, whereas 30 years ago this proportion was only 36%.

A recent survey by the Federal Reserve shows that, as of 2022, the top 10% of households in terms of income held an average of about 2.1 million dollars in Stocks per person, which accounts for approximately 32% of their net worth. In 2010, Stocks made up about 26% of the average net worth of this group.

Over the past four years, spending among the top 10% of earners has increased by 58%. The inflow into the stock market is not just coming from the wealthiest individuals. Reports from Vanguard and Fidelity indicate that participation and contribution levels for working-class individuals in their 401(k) plans have reached record highs.

Federal Reserve data shows that as of the end of last year, 43% of U.S. households' financial assets were in Stocks, setting a historical record. Many low-income households do not own Stocks, but the proportion of those who do continues to rise.

Because of this, some economists worry that a severe market downturn would cause Americans to cut back on all spending from vacations to buying new clothes, a fluctuation referred to as the wealth effect. Deutsche Bank economists estimate that if the stock market had merely stabilized rather than rebounded last year, consumer spending would have only grown by about 2% instead of the 3% partially driven by the stock market wealth effect.

Some signs suggest that Consumer spending may already be declining. Companies including Delta Air Lines, Foot Locker, and Brown-Forman, the maker of Jack Daniel's whiskey, have indicated that consumers appear to be behaving more cautiously. In January, retail sales fell by 0.9%, marking the largest single-month decline since 2023, although some economists attribute this to unusually cold weather. February's data will be released on Monday.

Matthew Luzzetti, chief US economist at Deutsche Bank, said that if nothing else changes, a 20% drop in Stocks could lead to a 1.2 percentage point drag on Consumer spending by 2025. As Consumer spending accounts for about 70% of GDP, this would result in an approximate 0.8 percentage point drag on economic growth.

Independent economist Phil Suttle is concerned that as the Nasdaq has fallen more than 10% from its peak, frightened executives may abandon plans to spend about 1 trillion dollars on AI-related investments over the next few years.

Chodorow-Reich and two colleagues found in a 2021 study that for every 1 dollar change in stock market wealth, it typically affects household spending by about 3 cents. According to the Federal Reserve, by the end of last year, U.S. households held more than 56 trillion dollars in Stocks directly or through products like mutual funds, so fluctuations in the stock market have a significant impact on household spending.

Economists Sydney Ludvigson and Martin Lettau studied the wealth effect in the early 2000s. They concluded that over time, stable stock returns encourage consumption, but people generally do not overreact to short-term fluctuations in the market. The challenge for economists is that you cannot know which rebounds or reversals will last before they become a thing of the past.

Editor/jayden