After two years of strong performance, the stock market has struggled here in 2025. Paired with economic data that has surprised to the downside, the threat of a global trade war has weighed heavily on Wall Street.
And it could all come to head just two days from now, on Wednesday, April 2 – what U.S. President Donald Trump is calling “Liberation Day.”
That’s when Trump is set to announce a set of sweeping reciprocal tariffs against America’s biggest trading partners. And depending on their severity and longevity, they have the potential to fundamentally reshape the global economic landscape.
Some think the tariffs are simply a negotiating tactic for the U.S. to strong-arm its way into better trading deals. Others think they could remain in place to help grow the nation’s depleted coffers.
And the truth is that no one really knows.
Indeed, as Yahoo Finance’s Ben Werschkul pointed out, “The vastness of possibilities appears to be widening after Trump recently teased that he ‘may give a lot of countries breaks’ and said Sunday night he could be ‘generous’ even as he quickly added that ‘all countries’ could be impacted. A campaign trail idea of blanket 20% across-the-board tariffs also appears to have reemerged as at least an option.”
Even National Economic Council Director Kevin Hassett told Fox News that he couldn’t give “any forward-looking guidance on what’s going to happen this week.”
An overwhelming amount of uncertainty continues… Can’t say we’re surprised.
However, one thing we know for certain is that these tariffs – regardless of if they have staying power – will create enormous stock market volatility.
Just look at what has happened in the last month…
The Trade War Has Weighed on Wall Street
On Feb. 1, 2025, Trump issued executive orders announcing tariffs on Canada, Mexico, and China, to go into effect on Feb. 4. This started the trade war drama that persists today.
Since then, hardly any of the tariffs he has threatened or issued have stuck around, save a few against China. Still, the markets have tumbled.
The S&P 500 dropped more than 10% from the middle of February to the middle of March. The Nasdaq fell almost 15%, and the Russell 2000 crashed nearly 20%. Collectively, the “Magnificent 7” tech stocks dropped more than 20%.
Tariff uncertainty alone has created massive market volatility.
The uncertainty could intensify this week on April 2, when Trump enforces even more – potentially even larger – tariffs.
And if this trade war drama persists beyond that day, the market will keep reacting violently.
Huge crashes when tariffs are announced; huge rebound rallies when they’re paused. Another big selloff when more tariffs come, then another big rebound when those tariffs are delayed…
Lather. Rinse. Repeat.
The Final Word
All that means a very volatile stock market for the foreseeable future.
If the first two months of Trump 2.0 has taught us anything, it is to prepare for the unexpected.
And here, the unexpected just may plunge the global economy into a recession…
Major risks are emerging. And we need to be ready for them.
That’s why we’ve created a brand-new special report: the Trade War Protection Playbook.
This defensive guide includes our top 10 favorite stock market plays to protect your wealth – and potentially even grow it – if this global trade war spirals out of control.
And with “Liberation Day” arriving in just two days, we think it’s best to check it out ASAP.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
P.S. You can stay up to speed with Luke’s latest market analysis by reading our Daily Notes! Check out the latest issue on your Innovation Investor or Early Stage Investor subscriber site.
