US stocks wiped out, Trump recession looms

US stocks have plummeted in the worst day since 2020, as the global tariff war heats up and Donald Trump doesn’t rule out a recession.

US stocks plummeted sharply again on Monday as investors panicked over tariff fears and Donald Trump refused to rule out a recession.

There are also fears about the US government’s funding bill, which must be passed to avoid a partial government shutdown from Friday.

In an interview on Fox News on Sunday, President Trump said the US economy was going through a “period of transition” and “you can’t really watch the stock market”.

“There is a period of transition, because what we’re doing is very big,” Mr Trump said on Sunday Morning Futures. “We’re bringing wealth back to America. That’s a big thing. It takes a little time, but I think it should be great for us.”

Elon Musk’s Tesla plunged 15 per cent. Picture: Patrick Pleul/AFP

Asked if he thought a recession was imminent, Mr Trump said, “I hate to predict things like that … Look, we’re going to have disruption, but we’re OK with that.”

His comments came after Treasury Secretary Scott Bessent said on Friday that there would be a “rebalancing” of the economy as public spending was slashed.

“There’s going to be a natural adjustment as we move away from public spending to private spending,” Mr Bessent told CNBC. “The market and the economy have just become hooked and we’ve become addicted to this government spending, and there’s going to be a detox period.”

While markets were previously bolstered by hopes of tax cuts and lighter regulation, Steve Sosnick of Interactive Brokers noted that sentiment has been bogged down by more immediate worries over tariffs.

Since taking office in January, Mr Trump has imposed sweeping tariffs on imports from Canada, Mexico and China — even as he backed off some of the levies on his country’s immediate neighbours.

The tariff war shows no signs of slowing down. Picture: AFP

A new wave of tariffs threatens to hit this week, with steep levies of 25 per cent on steel and aluminium due to take effect on Wednesday.

“Ongoing confusion about tariffs and concerns that maybe the DOGE cuts are excessive led to a drop in consumer sentiment, and are now leading to fears of a slowdown or higher inflation or both,” Mr Sosnick said.

He was referring to sweeping cuts to the federal government overseen by Elon Musk and his Department of Government Efficiency (DOGE).

TS Lombard economist Dario Perkins said in a note to clients on Friday it was “odd to see US policymakers talk as if they want to inflict damage on the economy, or at least do things that risk causing damage”, per CNBC.

Mr Perkins said the combination of tariffs and federal spending cuts was “dangerous” and marked a shift from the “whatever-it-takes” policy markets had grown used to.

“This is something new,” he said. “It is Muck-Around-and-Find-Out policy, to use the polite term.”

Wall Street plunged on Monday amid tariff and recession fears. Picture: Charly Triballeau/AFP

Musk the biggest loser

Mr Musk’s Tesla was the biggest loser of the day, with the electric carmaker’s stock crashing by 15.1 per cent to its lowest level since October 23, wiping out $US128 billion ($203 billion) in market capitalisation and erasing its post-election gains.

The tech-heavy Nasdaq index fell 4 per cent to 17,468.32 — its biggest one-day point decline since March 2020 and its biggest percentage decline since September 2022 — the broader S&P 500 fell 155.64 points, or 2.7 per cent, to 5614.56, while the Dow Jones Industrial Average fell 890.91 points, or 2.1 per cent, to 41,911.71.

The S&P and the Nasdaq both closed at their lowest levels since September.

Alongside Tesla, the other “Magnificent Seven” large tech companies were also pummeled.

Apple, the world’s most valuable company, fell 4.85 per cent, Alphabet and Meta each lost more than 4.4 per cent, AI chipmaker Nvidia was down 5 per cent, Microsoft 3.34 per cent and Amazon 2.36 per cent.

US President Donald Trump. Picture: Win McNamee/AP

Palantir, the surveillance tech company co-founded by Musk ally and major Republican donor Peter Thiel, took a brutal 10 per cent beating as investors turned their back on the formerly cult stock.

“The sell-off in stock markets extended as confidence in the US growth outlook continued to falter, President Trump refused to rule out a recession and Kevin Hassett, chair of the US National Economic Council, said that negative Q1 growth expectations are because of [former President] Biden and the timing of tariffs,” ANZ analysts Brian Martin and Daniel Hynes said in a note on Tuesday.

“No let-up in uncertainty seems likely in the near term given reciprocal and other tariffs will be announced in April with more to follow in May. The US administration is viewing current uncertainty-related weakness as an ‘adjustment’ as the economy transitions to fairer trade and a smaller role for the federal government.”

The yield on US 10-year bonds fell seven basis points to 4.23 per cent, oil was down 1.5 per cent, gold fell 0.7 per cent and iron ore lost 0.56 per cent.

— with AFP

Originally published as US stocks wiped out, Trump recession looms