The global stock market crash of 2025 is unfolding rapidly after U.S. President Donald Trump imposed sweeping tariffs on imports from around the world. The aggressive move—aimed at slashing the U.S. trade deficit—has sent shockwaves through financial markets, triggering widespread sell-offs and deepening investor anxiety.
On April 2, the United States levied sweeping tariffs, a base rate of 10%, and country-specific rates going as high as 49%, aimed at reducing the nation’s $1.2 trillion trade deficit. The measures resulted in doubling the average U.S. tariff from 2% to over 20%, drawing comparisons to the Smoot-Hawley tariffs of the 1930s and fueling stagflation fears. In response, both friends and foes instituted retaliatory measures: China levied 34% tariffs on U.S. goods, expanded export controls, and restricted U.S. companies, while Canada and other nations threatened similar retaliation.
The unexpected aftermath resulted in massive losses in the U.S. financial markets. Nasdaq fell by nearly 5%, and the Dow Jones Industrial Average fell by nearly 1,600 points following China’s retaliatory tariff announcement. Investors responded sharply, resulting in a loss of approximately $6 trillion in market value since the tariff announcement. JPMorgan increased the likelihood of a global recession to 60%. Although a robust U.S. jobs report indicated the creation of 228,000 jobs, market sentiment remained gloomy, with major global indexes declining and oil prices reaching an 18-month low. Federal Reserve Chairman Jerome Powell cautioned of looming economic troubles, including elevated prices and lower growth, fueled by tariffs that were higher than anticipated.
Former Goldman Sachs CEO Lloyd Blankfein called on President Trump to suspend the imposition of reciprocal tariffs for six months to provide time for negotiations and to prevent further escalation of global trade tensions. The call came as the stock market plummeted in a sharp two-day decline, with the Dow Jones dropping more than 3,200 points and the Nasdaq entering bear market status following China’s retaliatory 34% tariffs on U.S. imports. Blankfein proposed going ahead with the scheduled 10% base tariff but withholding more severe reciprocal actions scheduled for Wednesday.
The Indian equity market was not isolated from these international shocks. The benchmark Sensex went into a correction phase, falling over 10% from its recent high of 85,978.25 on September 27, 2024. A 10% fall from that level marks the crucial threshold at 75,364.69, which has been crossed. The continuous selling by foreign portfolio investors (FPIs) has been triggered by poor second-quarter performances and the quick run-up in stock prices post-general elections in May. Recently, Trump’s election has induced fear within the markets owing to his frightening threats to initiate protectionist policies by charging 60% customs duties on imports from China.
Experts were concerned that Trump’s threat of a tariff would generate more volatility in international markets, with India particularly badly affected since its tariff levels on American imports were relatively higher. Sensitive industries such as automobiles, pharma, textiles, and steel were in the firing line. In an effort to contain risks, India had considered reducing tariffs and negotiating trade, with a view to consolidating a deeper economic partnership with the U.S.
The wider implications of these tariffs point to a probable shift towards trade regionalization and supply chain diversification, as nations revisit their economic plans in the backdrop of evolving global trade dynamics. This shift is a shift in global trade dynamics in the long term, thus refuting the assumptions that have been made since the post-World War period.