Recession Fears Rattle U.S. Stock Market

The sharp market drop on Monday is undermining President Trump’s economic promises. In the run-up to the election, Trump gained a significant advantage over Kamala Harris by focusing on inflation and high prices. However, his trade wars are rattling the markets. His push for a more protectionist U.S. economy has reignited fears of a recession. Over the weekend, Trump’s remarks about a “painful transition period” in the economy turned existing concerns into full-blown panic. While he may attempt to calm the markets with new statements, it’s clear that he remains committed to transforming the American economy through tariffs and domestic production incentives.

Given how long such a structural shift would take, if Trump pivots to economic populism ahead of the 2026 midterms, the hardships endured in the meantime may have been for nothing. The erasure of post-election gains in both Wall Street and the Bitcoin market, combined with potentially poor inflation data expected this week, will only deepen uncertainty. This not only creates a political climate that could hinder economic reforms but also risks alienating investors who initially celebrated Trump’s victory.

The Numbers Tell the Story

As of Monday’s market close, the S&P 500—one of the most established indicators—fell by 2.7%, with 70% of its listed companies trading at least 10% below their one-year highs. The tech-heavy Nasdaq dropped around 4%, with major players like Apple, Meta, Nvidia, and Microsoft losing up to 5%. Tesla, meanwhile, plunged by 15%, a sign that market confidence in Elon Musk is wavering. The U.S. stock market’s single-day loss of approximately $1.5 trillion underscores the extent of the panic.

Of course, basing political-economic analysis on a single day’s trading is risky. However, it’s becoming increasingly clear that both stock and crypto investors, who had expected Trump’s policies to boost the markets, are now seeing otherwise.

Last week’s employment figures added to the uncertainty. While the market had expected net job creation to reach around 170,000, the actual figure came in at 151,000—an indicator of economic slowdown that unsettled investors. Meanwhile, the full impact of mass layoffs within the federal government, championed by Musk under the banner of efficiency, has yet to show up in the data. Inflation figures to be released this week will reveal whether price increases are here to stay. If monthly inflation matches the projected 0.3% increase, annual inflation will dip from 3% to 2.9%. However, if inflation rises further, Trump’s tariffs on Canada, Mexico, and China could be blamed. The combination of weak job numbers, stalled inflation progress, and the shock of trade tariffs is failing to inspire confidence in financial markets—while also damaging Trump’s popularity.

Will Protectionism and Populism Win?

A significant portion of the U.S. economy’s strength comes from international trade. Many American capitalists, traditionally in favor of free markets and minimal trade barriers, are far from pleased with Trump’s protectionist stance. The U.S. has long been deeply integrated into a free-trade system with Canada and Mexico, yet it is now actively undermining these ties. Imposing tariffs on these countries won’t just hurt them—it will also drive up costs for American consumers, especially in key sectors like automotive and agriculture.

Rather than targeting specific strategic industries, Trump’s across-the-board tariffs will make products more expensive across the board. Meanwhile, as other nations seek new trade partners, the U.S. risks isolating itself. Compounding this issue is the lack of a robust domestic manufacturing base capable of replacing imports—a critical weakness in Trump’s protectionist strategy.

Every day that Trump’s economic populist promises go unfulfilled, his political capital diminishes. Musk’s pledge to save the federal government $1 trillion through budget cuts is unrealistic without touching Social Security and Medicaid—two of the most politically sensitive programs. Any attempt to cut these benefits would alienate millions of retirees and elderly Americans, draining Musk’s political credibility in the process. Trump could try to scapegoat Musk by firing him, but such moves would only add to the market instability.

During his first term, Trump secured the backing of businesses and investors through tax cuts. However, if he continues down his current path, he risks losing their support this time around. If he is genuinely willing to risk a recession for the sake of protectionism and populism, he must act quickly. The longer uncertainty drags on, the weaker his political grip becomes. A prolonged economic downturn in the U.S. could also ripple across the global economy, potentially triggering a new crisis.

Financial markets had rallied before the election, buoyed by Trump’s promises of economic growth. Now, his protectionist policies are triggering panic. Whether this panic is temporary remains to be seen, but if Trump pushes the U.S. into a recession, he could find himself losing key allies in the business and investment world.

Yeni Safak March 11, 2025