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Yahoo
2 days ago
- Business
- Yahoo
Will the Stock Market Crash as Tariffs Hit the Economy in 2025? History Offers an Important Clue.
The S&P 500 crashed when President Trump unveiled his "Liberation Day" tariffs in early April, but the benchmark index has since staged an astounding recovery. History says President Trump's tariffs could cause a recession, and the S&P 500 has declined by an average of 31% during past recessions. The S&P 500's best days and worst days often occur in clusters, so investors that sit on the sidelines during drawdowns risk missing the rebound. 10 stocks we like better than S&P 500 Index › The S&P 500 (SNPINDEX: ^GSPC) rocketed higher when Donald Trump won the presidential election in November. Investors assumed his administration would usher in a period of booming economic growth with tax cuts and deregulation. Instead, Trump has made changes to U.S. trade policy that numerous economists say will slow economic growth and raise prices. The S&P 500 began falling in February when Trump fired the first salvo in the trade war: He announced tariffs on goods from China, Canada, and Mexico, followed by duties on aluminum, steel, and auto imports. But the losses accelerated in April when the president unveiled more aggressive "Liberation Day" tariffs. The news erased over $6 trillion from the U.S. stock market in two trading days. Surprisingly, the S&P 500 has since staged one of its greatest comebacks in history. The index is actually up 2% year to date and currently sits within striking distance of its record high. Trump softening his stance on certain trade policies has been the primary reason for the recovery, but the most aggressive tariffs are merely paused and some Wall Street analysts think investors have been lulled into a false sense of security. Will the stock market crash (again) in 2025? Here's what investors should know. The Budget Lab at Yale University estimates tariffs effective as of June 2 have pushed the average tax on U.S. imports from 2.5% in 2024 to 15.6% in 2025, the highest level since 1937. History offers a clue about what may happen if President Trump stays the course with the current trade war. Consider this information: The average tax on U.S. imports rose 14 percentage points between 1918 and 1933. That is similar to the 13-point increase this year, but the present situation is arguably more severe because of the accelerated timeline. President Trump has effected a massive tariff hike in a matter of weeks rather than over 15 years. The U.S. suffered five distinct recessions between 1918 and 1933, including the Great Depression. In fact, tariffs were such a persistent headwind during that 15-year period that the U.S. economy spent 95 months (about half the period) in a recession, according to the National Bureau of Economic Research. From that perspective, President Trump's tariffs could indeed cause a recession in the coming months, and recessions have historically coincided with stock market crashes. The following chart shows the peak-to-trough decline in the S&P 500 during every recession since the index was created in March 1957. Recession Start Date S&P 500's Peak-to-Trough Decline August 1957 21% April 1960 14% December 1969 36% November 1973 48% January 1980 17% July 1981 27% July 1990 20% March 2001 37% December 2007 57% February 2020 34% Average 32% Data source: Truist Advisory Services. As shown in the chart, the S&P 500 has declined by an average of 32% during recessions. The least severe drawdown was 14% and the most severe drawdown was 57%. So history says there is a very good chance the stock market will crash if tariffs imposed by President Trump cause a recession. Whether that actually happens depends on the outcome of the ongoing trade negotiations. If the U.S. strikes deals that reduce the average tariff rate to something reasonable, a recession would be less likely. Investors concerned about a market crash may think it prudent to sell their stocks and sit on the sidelines until the economic storm clouds clear. But a market crash is not guaranteed. And even if it was, market timing strategies tend to backfire because the best and worst days often occur in close proximity. In the last two decades, seven of the 10 best trading days happened within two weeks of the 10 worst trading days. And missing the best days led to severe underperformance. JPMorgan Chase strategists recently cited that statistic and concluded, "Market timing is futile and staying invested is paramount." That does not mean investors should keep every stock they currently own. The S&P 500 is trading near its all-time high, so the present is an excellent time to sell any stocks where confidence is lacking. The present is also a good time for investors to stockpile some cash in their portfolios. Spare cash makes it easy to buy the dip during market corrections. However, investors should never overlook an opportunity to buy a high-conviction stock at a reasonable price. When I say high conviction, I mean any company whose earnings are virtually certain to be much higher in five years. And when I say reasonable price, I mean a sensible valuation multiple in the context of anticipated future growth. Here's the big picture: History says President Trump's tariffs could drag the U.S. economy into a recession, and recessions have usually coincided with steep declines in the S&P 500. So investors should be prepared for a market crash in the coming months, but they shouldn't be so consumed by the possibility that they avoid good stocks today. Before you buy stock in S&P 500 Index, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and S&P 500 Index wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $668,538!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $869,841!* Now, it's worth noting Stock Advisor's total average return is 789% — a market-crushing outperformance compared to 172% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of June 2, 2025 JPMorgan Chase is an advertising partner of Motley Fool Money. Trevor Jennewine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool has a disclosure policy. Will the Stock Market Crash as Tariffs Hit the Economy in 2025? History Offers an Important Clue. was originally published by The Motley Fool Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
Miami Herald
30-05-2025
- Business
- Miami Herald
Tariff ruling threatens a $2 trillion fiscal hole in Trump plan
The court ruling that blocked much of President Donald Trump's sweeping tariffs threatens to blow what some economists estimate as a $2 trillion hole into the U.S. fiscal outlook over the coming decade, should the judgment stay in place. The ruling could also present a new obstacle for Republicans who are relying on the revenue to help offset the cost of a roughly $4 trillion tax cut moving through Congress. 'At face value, this ruling will take away billions of dollars of prospective tariff revenue' annually, said Douglas Elmendorf a Harvard Kennedy School professor and former director of the Congressional Budget Office - a nonpartisan arm of the U.S. legislature. A federal appeals court Thursday paused the Court of International Trade's Wednesday ruling striking down a swath of Trump's levies, and the White House is pushing to overturn the judgment entirely, aiming to appeal to the Supreme Court as soon as Friday. If the CIT ruling survives appeal, it would remove duties that would have raised nearly $200 billion on an annual basis, according to estimates by Goldman Sachs Group Inc. and Citigroup Inc. Trump and his aides had been relying on that increased revenue to get Republican lawmakers united behind the president's 'big beautiful bill' tax-cut package. Plan B The $2 trillion in added revenue over a decade would have gone some way towards offsetting the cost of the tax cuts, as measured by the congressional Joint Committee on Taxation, as the legislation's spending reductions aren't expected to cover even half the tab. Failing judicial success, Trump's trade team would have to stitch together duties using executive authority other than the one struck down. But the process would take months, and decisions could still end up facing legal challenges, economists say. Treasury Secretary Scott Bessent said on Fox News Thursday that 'anything that the courts do to get in the way both harms the American people in terms of trade and in terms of tariff revenue.' Even a short-term hit to revenue would pose problems: the government is currently barred from raising net new debt, and the Treasury has been using special accounting maneuvers to make good on payments. Monthly customs revenue just hit a record of over $16 billion, helping the department's cash flows. Barclays Plc warned that the court ruling will bring forward the date by when the Treasury will have exhausted its cash and extraordinary measures. That in turn builds pressure on Republicans to get the tax bill done, as it includes an increase in the debt limit. Average tariff 'The fiscal outlook just got a lot worse as a result of this court ruling,' said Ernie Tedeschi, who is director of economics at Yale University's Budget Lab and a former Biden administration official. 'Very high tariffs just got less likely.' The Budget Lab also estimated revenues would be about $2 trillion lower over 10 years - roughly $700 billion compared with $2.7 trillion - if the court ruling stands, and current tariff levels remain in place. Wednesday's court ruling involved Trump's use of the International Emergency Economic Powers Act (IEEPA) to threaten the highest tariff rates in more than a century. The April 2 'Liberation Day' tariffs involved a universal baseline levy of 10% plus much bigger rates for various trading partners - though Trump had put those on pause prior to the ruling. Bloomberg Economics estimated that the average U.S. tariff rate got as high as nearly 27% at one point. The court ruling takes it below 6%. Other channels Trump has to impose tariffs include Section 232 authority to impose sectoral levies. The administration has already invoked it to set the stage for import taxes on items including smartphones and jet engines. Pharmaceuticals, semiconductors, lumber and other products are also being eyed for tariffs. Existing duties are in place on steel and autos, among others. 'There are other avenues to do the tariffs,' said Stephanie Roth, chief economist at Wolfe Research, who sees a $180 billion annual revenue hit from the court ruling. Economists at Citi, Goldman Sachs and Morgan Stanley expect the administration will ultimately raise the tariff revenue it needs. Estimates contested White House Council of Economic Advisers Chair Stephen Miran on May 27 told Bloomberg Television the tariffs would take in hundreds of billions of dollars a year, helping alleviate concerns about the fiscal deficit. Those estimates have bolstered the Trump administration against charges that its tax bill blows a hole in the budget. 'The blatantly wrong claim that the one, big beautiful bill increases the deficit is based on the Congressional Budget Office and other scorekeepers who use shoddy assumptions,' White House Press Secretary Karoline Leavitt told reporters Thursday. They have 'historically been terrible at forecasting,' she said. After the House passed a version of the tax bill earlier this month, it's now in the Senate's hands. It's possible that Senate Republicans could propose adding tariffs in the multi-trillion dollar spending bill to help offset costs, though it's unclear it would garner enough support to pass. 'They might include trying to get some tariffs,' said Alex Durante, senior economist at the Tax Foundation. 'But I really don't see the appetite for something as broad as what the president has done.' Trump in a Truth Social post Thursday evening blasted the option, saying, 'In other words, hundreds of politicians would sit around DC for weeks, and even months, trying to come to a conclusion as to what to charge other countries that are treating us unfairly.' Copyright (C) 2025, Tribune Content Agency, LLC. Portions copyrighted by the respective providers.
Yahoo
26-05-2025
- Business
- Yahoo
Your Memorial Day cookout might be more expensive this year
Memorial Day marks the unofficial start to summer, but this year, it may also kick off a season of higher prices. Small businesses that sell beer, fireworks and other summer staples told CNN they are grappling with higher costs amid new tariffs that the Trump administration placed on nearly all imports to the United States last month. Here's what you should know. While many economists expect prices to rise from President Donald Trump's tariffs, it's certainly true that not all items are seeing price increases — yet. In fact, US inflation in April slowed to its lowest rate in more than four years. That means some summer products may still be spared from an inflationary squeeze as tariffs work their way through the economy, said Ernie Tedeschi, the former chief economist at the White House Council of Economic Advisers during the Biden administration and the director of economics at the Budget Lab at Yale University, which has been tracking the tariff impact on consumers. But if you're planning a cookout, tariff-induced price increases could hit your grocery bill sooner than other price hikes. 'Perishable goods like food are the imports that turn over more quickly,' Tedeschi said. 'So the price that you see at any given time is more likely to reflect tariffs.' The cost of buying a new barbecue to grill that food might still be stable, though, he said. 'Where there's more of a delay on tariffs are things like durable goods, like a barbecue or grill,' Tedeschi said. 'The reason is that retailers like Home Depot and Best Buy generally still have a large pre-tariff inventory. They will likely sell through that first before they start selling the tariffed goods that cost more.' Another key ingredient to most barbecues also hasn't been spared by tariffs: beer. In April, President Donald Trump placed a 25% tariff on imported aluminum and steel, including empty aluminum cans and imported canned beer. About 38.5%, or 16.1 million barrels of imported beer, came in cans in 2024, according to the Brewers Association, a trade association for brewers. Even local, US-based brewers are feeling cost pressures rise. Sheila Malone, a manager at Long Ireland Beer Company in Riverhead, New York, told CNN that rising expenses have left the future of her business uncertain. Malone said she's seen the cost of everything from hops to plastic cups rise over the last few years. Now, she estimates the cost of the aluminum cans her company purchases has risen between 10% and 15% this year. 'Every day we open up our social media and we see another brewery that we follow saying they are closing their doors, and that's a really scary reality for us,' Malone said. Long Ireland Beer Company recently raised its prices for the first time in years to keep up, said Malone, who added that the company is searching for lower-cost aluminum suppliers and seeking new ways to grow profits to stay afloat. Memorial Day weekend also kicks off the busy season for fireworks businesses. Douglas Burda, the CEO of Red Apple Fireworks, said the majority of fireworks are imported from China, which has been producing fireworks for hundreds of years. There are very few businesses that manufacture fireworks in the United States, Burda noted. On April 10, tariffs on nearly all Chinese imports, including fireworks, climbed as high as 145% as a tit-for-tat trade conflict between China and the United States escalated. About a month later, the Trump administration announced it would temporarily lower the tax on Chinese imports to 30%. Burda said he hasn't had to raise prices yet, since his company has stockpiled enough fireworks to last through the summer in its large warehouse and retail spaces. However, Americans who buy fireworks at roadside stands will likely face higher prices this summer due to tariffs, Burda said. 'Consumers by and large buy fireworks at the last minute on the side of the road. You're always going to see higher prices when you do that,' Burda said. 'But now, for certain, those already-high prices are going to be even higher.' However, there may be one place to find savings if you are one of the nearly 40 million Americans traveling by car this Memorial Day. The national average price of a gallon of gasoline is expected to be $3.08 on Memorial Day, according to projections released Tuesday by fuel savings platform GasBuddy. That is the lowest gas price for Memorial Day weekend since 2021. For many Americans, Memorial Day is about more than pool parties and picnics. It is a day dedicated to honoring and remembering the people who died while serving in the US military. Americans who may be looking to purchase an American flag this holiday weekend will have a harder time finding cheaper flags produced overseas this year, said Reggie VandenBosch, who works at Valley Forge Flag Company, one of the largest American flag manufacturers. That's because earlier this month, a major shipping loophole, known as the de minimis exemption, which allowed shipments of goods worth $800 or less to come into the United States duty-free, expired. Now those lower-cost shipments are taxed between 30% and 54%. Before the loophole was closed, e-commerce sites like Amazon had been flooded with cheaper flags claiming to be American-made. 'Many Americans don't think of an American flag as being an American flag if it's made offshore,' VandenBosch said. 'Now that the de minimis loophole was eliminated, we're already starting to see sales return on those platforms back to the domestic players.' - CNN's Matt Egan contributed to reporting. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
CNN
26-05-2025
- Business
- CNN
Your Memorial Day cookout might be more expensive this year – thanks to tariffs
Memorial Day marks the unofficial start to summer, but this year, it may also kick off a season of higher prices. Small businesses that sell beer, fireworks and other summer staples told CNN they are grappling with higher costs amid new tariffs that the Trump administration placed on nearly all imports to the United States last month. Here's what you should know. While many economists expect prices to rise from President Donald Trump's tariffs, it's certainly true that not all items are seeing price increases — yet. In fact, US inflation in April slowed to its lowest rate in more than four years. That means some summer products may still be spared from an inflationary squeeze as tariffs work their way through the economy, said Ernie Tedeschi, the former chief economist at the White House Council of Economic Advisers during the Biden administration and the director of economics at the Budget Lab at Yale University, which has been tracking the tariff impact on consumers. But if you're planning a cookout, tariff-induced price increases could hit your grocery bill sooner than other price hikes. 'Perishable goods like food are the imports that turn over more quickly,' Tedeschi said. 'So the price that you see at any given time is more likely to reflect tariffs.' The cost of buying a new barbecue to grill that food might still be stable, though, he said. 'Where there's more of a delay on tariffs are things like durable goods, like a barbecue or grill,' Tedeschi said. 'The reason is that retailers like Home Depot and Best Buy generally still have a large pre-tariff inventory. They will likely sell through that first before they start selling the tariffed goods that cost more.' Another key ingredient to most barbecues also hasn't been spared by tariffs: beer. In April, President Donald Trump placed a 25% tariff on imported aluminum and steel, including empty aluminum cans and imported canned beer. About 38.5%, or 16.1 million barrels of imported beer, came in cans in 2024, according to the Brewers Association, a trade association for brewers. Even local, US-based brewers are feeling cost pressures rise. Sheila Malone, a manager at Long Ireland Beer Company in Riverhead, New York, told CNN that rising expenses have left the future of her business uncertain. Malone said she's seen the cost of everything from hops to plastic cups rise over the last few years. Now, she estimates the cost of the aluminum cans her company purchases has risen between 10% and 15% this year. 'Every day we open up our social media and we see another brewery that we follow saying they are closing their doors, and that's a really scary reality for us,' Malone said. Long Ireland Beer Company recently raised its prices for the first time in years to keep up, said Malone, who added that the company is searching for lower-cost aluminum suppliers and seeking new ways to grow profits to stay afloat. Memorial Day weekend also kicks off the busy season for fireworks businesses. Douglas Burda, the CEO of Red Apple Fireworks, said the majority of fireworks are imported from China, which has been producing fireworks for hundreds of years. There are very few businesses that manufacture fireworks in the United States, Burda noted. On April 10, tariffs on nearly all Chinese imports, including fireworks, climbed as high as 145% as a tit-for-tat trade conflict between China and the United States escalated. About a month later, the Trump administration announced it would temporarily lower the tax on Chinese imports to 30%. Burda said he hasn't had to raise prices yet, since his company has stockpiled enough fireworks to last through the summer in its large warehouse and retail spaces. However, Americans who buy fireworks at roadside stands will likely face higher prices this summer due to tariffs, Burda said. 'Consumers by and large buy fireworks at the last minute on the side of the road. You're always going to see higher prices when you do that,' Burda said. 'But now, for certain, those already-high prices are going to be even higher.' However, there may be one place to find savings if you are one of the nearly 40 million Americans traveling by car this Memorial Day. The national average price of a gallon of gasoline is expected to be $3.08 on Memorial Day, according to projections released Tuesday by fuel savings platform GasBuddy. That is the lowest gas price for Memorial Day weekend since 2021. For many Americans, Memorial Day is about more than pool parties and picnics. It is a day dedicated to honoring and remembering the people who died while serving in the US military. Americans who may be looking to purchase an American flag this holiday weekend will have a harder time finding cheaper flags produced overseas this year, said Reggie VandenBosch, who works at Valley Forge Flag Company, one of the largest American flag manufacturers. That's because earlier this month, a major shipping loophole, known as the de minimis exemption, which allowed shipments of goods worth $800 or less to come into the United States duty-free, expired. Now those lower-cost shipments are taxed between 30% and 54%. Before the loophole was closed, e-commerce sites like Amazon had been flooded with cheaper flags claiming to be American-made. 'Many Americans don't think of an American flag as being an American flag if it's made offshore,' VandenBosch said. 'Now that the de minimis loophole was eliminated, we're already starting to see sales return on those platforms back to the domestic players.'
CNN
26-05-2025
- Business
- CNN
Your Memorial Day cookout might be more expensive this year – thanks to tariffs
Memorial Day marks the unofficial start to summer, but this year, it may also kick off a season of higher prices. Small businesses that sell beer, fireworks and other summer staples told CNN they are grappling with higher costs amid new tariffs that the Trump administration placed on nearly all imports to the United States last month. Here's what you should know. While many economists expect prices to rise from President Donald Trump's tariffs, it's certainly true that not all items are seeing price increases — yet. In fact, US inflation in April slowed to its lowest rate in more than four years. That means some summer products may still be spared from an inflationary squeeze as tariffs work their way through the economy, said Ernie Tedeschi, the former chief economist at the White House Council of Economic Advisers during the Biden administration and the director of economics at the Budget Lab at Yale University, which has been tracking the tariff impact on consumers. But if you're planning a cookout, tariff-induced price increases could hit your grocery bill sooner than other price hikes. 'Perishable goods like food are the imports that turn over more quickly,' Tedeschi said. 'So the price that you see at any given time is more likely to reflect tariffs.' The cost of buying a new barbecue to grill that food might still be stable, though, he said. 'Where there's more of a delay on tariffs are things like durable goods, like a barbecue or grill,' Tedeschi said. 'The reason is that retailers like Home Depot and Best Buy generally still have a large pre-tariff inventory. They will likely sell through that first before they start selling the tariffed goods that cost more.' Another key ingredient to most barbecues also hasn't been spared by tariffs: beer. In April, President Donald Trump placed a 25% tariff on imported aluminum and steel, including empty aluminum cans and imported canned beer. About 38.5%, or 16.1 million barrels of imported beer, came in cans in 2024, according to the Brewers Association, a trade association for brewers. Even local, US-based brewers are feeling cost pressures rise. Sheila Malone, a manager at Long Ireland Beer Company in Riverhead, New York, told CNN that rising expenses have left the future of her business uncertain. Malone said she's seen the cost of everything from hops to plastic cups rise over the last few years. Now, she estimates the cost of the aluminum cans her company purchases has risen between 10% and 15% this year. 'Every day we open up our social media and we see another brewery that we follow saying they are closing their doors, and that's a really scary reality for us,' Malone said. Long Ireland Beer Company recently raised its prices for the first time in years to keep up, said Malone, who added that the company is searching for lower-cost aluminum suppliers and seeking new ways to grow profits to stay afloat. Memorial Day weekend also kicks off the busy season for fireworks businesses. Douglas Burda, the CEO of Red Apple Fireworks, said the majority of fireworks are imported from China, which has been producing fireworks for hundreds of years. There are very few businesses that manufacture fireworks in the United States, Burda noted. On April 10, tariffs on nearly all Chinese imports, including fireworks, climbed as high as 145% as a tit-for-tat trade conflict between China and the United States escalated. About a month later, the Trump administration announced it would temporarily lower the tax on Chinese imports to 30%. Burda said he hasn't had to raise prices yet, since his company has stockpiled enough fireworks to last through the summer in its large warehouse and retail spaces. However, Americans who buy fireworks at roadside stands will likely face higher prices this summer due to tariffs, Burda said. 'Consumers by and large buy fireworks at the last minute on the side of the road. You're always going to see higher prices when you do that,' Burda said. 'But now, for certain, those already-high prices are going to be even higher.' However, there may be one place to find savings if you are one of the nearly 40 million Americans traveling by car this Memorial Day. The national average price of a gallon of gasoline is expected to be $3.08 on Memorial Day, according to projections released Tuesday by fuel savings platform GasBuddy. That is the lowest gas price for Memorial Day weekend since 2021. For many Americans, Memorial Day is about more than pool parties and picnics. It is a day dedicated to honoring and remembering the people who died while serving in the US military. Americans who may be looking to purchase an American flag this holiday weekend will have a harder time finding cheaper flags produced overseas this year, said Reggie VandenBosch, who works at Valley Forge Flag Company, one of the largest American flag manufacturers. That's because earlier this month, a major shipping loophole, known as the de minimis exemption, which allowed shipments of goods worth $800 or less to come into the United States duty-free, expired. Now those lower-cost shipments are taxed between 30% and 54%. Before the loophole was closed, e-commerce sites like Amazon had been flooded with cheaper flags claiming to be American-made. 'Many Americans don't think of an American flag as being an American flag if it's made offshore,' VandenBosch said. 'Now that the de minimis loophole was eliminated, we're already starting to see sales return on those platforms back to the domestic players.'
