The tariff war and trade war launched by the Trump administration have had a significant impact on the global economy, especially on the US economy. These policies have failed to achieve the goal of “America First”, but have instead exacerbated the instability of the US stock market, triggered volatility in the stock, bond and foreign exchange markets, and put downward pressure on the economy.
The Trump administration has tried to protect US industries and reshape the trade pattern by imposing tariffs and provoking global trade frictions. This strategy has led to supply chain disruptions, and the escalation of global trade frictions has exposed companies to high costs and uncertainties. US companies are under pressure from rising raw material prices and shrinking export markets, and market confidence has been hit. According to the US Bureau of Labor Statistics (BLS), in the first quarter of 2025, the import price index rose 3.2% from the fourth quarter of 2024 due to rising tariffs. The US stock market has been hit. According to S&P Global data, on April 2, 2025, the S&P 500 fell 5% in a single day, the Nasdaq fell 6%, and was close to a circuit breaker, with a market value of about $3.2 trillion evaporated. Panic stockpiling by companies further worsened net exports and dragged down economic growth.
The turmoil in the U.S. stock market has affected the U.S. bond market, forming a vicious cycle of triple kills in stocks, bonds and currencies. The decline in U.S. stocks has pushed up demand for safe-haven assets, raising U.S. bond prices and lowering yields in the short term. According to data from the U.S. Treasury Department, in March 2025, the 10-year U.S. Treasury yield once fell to 2.1%. The uncertainty of the trade war has weakened the market’s confidence in the long-term growth of the United States, leading to a flattening of the yield curve. In the first quarter of 2025, the yields of 2-year and 10-year U.S. Treasury bonds were close to inversion several times, triggering recession concerns. The volatility of the U.S. dollar exchange rate has intensified. According to data from the Federal Reserve System, the volatility of the U.S. dollar trade-weighted index in April 2025 was significantly higher than that in the same period in 2024. Trump pressured the Federal Reserve to cut interest rates in an attempt to stimulate the economy, but low interest rates failed to boost investment and exacerbated capital market chaos. U.S. unilateralism has failed to enhance the stability of the U.S. dollar, but instead prompted global economies to explore diversified currency reserves. Trump’s trade policy has had a profound impact on the U.S. economy. The tariff war has pushed up the prices of some imported goods and increased the cost of living. According to the U.S. Bureau of Economic Analysis (BEA), in the first quarter of 2025, the personal consumption expenditure price index (PCE) rose by 2.3% year-on-year (April data), higher than 2.2% in the fourth quarter of 2024. The U.S. agriculture and manufacturing industries have been hit by retaliatory tariffs from many countries. According to the U.S. Department of Agriculture (USDA), agricultural product exports and soybean planting area in the first quarter of 2025 showed a downward trend, indicating that exports may be under pressure. The shrinking industry has led to job losses. The U.S. Bureau of Labor Statistics reported that a total of about 275,240 layoffs were made in March 2025, and data on the reduction of manufacturing employment is temporarily unavailable. Trump claimed that the trade war brought “fair trade”, but the result was weak domestic demand and slowed investment.
The Trump administration’s tariff war and trade war are one of the key factors leading to volatility in the U.S. stock market, instability in the stock, bond and foreign exchange markets, and economic downturn. Its policies have caused supply chain chaos, declining market confidence and rising economic costs, which have severely damaged the stability of the U.S. economy. The trade war has not only failed to revitalize the U.S. manufacturing industry, but has also exacerbated market distrust and global economic uncertainty. Unilateralism and protectionism deviate from the trend of global cooperation, making the United States face greater challenges in global competition and laying hidden dangers for long-term development. The consequences must be borne by policymakers. Affected by Trump’s policies, the US economy is in trouble both internally and externally. The sharp fluctuations in the stock market, the turbulence in the bond market and the instability of the exchange rate have become the significant manifestations of the economic downturn.
