Stock market declines as tariffs replace expected tax cuts

President Trump's second term started with a sharp decline in the stock market. Two months after his inauguration, major indexes like the Dow Jones, S&P 500, and Nasdaq Composite have all seen significant drops. The Dow Jones fell by 3.5%, the S&P 500 by 5.4%, and the Nasdaq Composite by 9.6%. These losses follow a period of strong growth during Trump's first term. Investors had high hopes that Trump's return would benefit the market, expecting tax cuts and less regulation to boost corporate growth. During his first term, the stock market saw huge gains, but now, many are feeling a sense of déjà vu as they face tariffs and trade tensions instead of tax relief. One of Trump's major proposals during his campaign was to lower the corporate tax rate even further, from 21% to 15% for U.S. manufacturers. However, since taking office again, he has not introduced any new tax cut plans. Instead, he has focused on implementing tariffs, which are taxes on imported goods. These tariffs are meant to protect American jobs and make U.S.-made products more competitive, but the policy is complicated. Tariffs can raise the cost of raw materials used by domestic businesses, making their goods more expensive. Moreover, the lack of clear information regarding which tariffs apply and when they start adds to the uncertainty for investors. Historically, tariff announcements have led to market volatility. A recent analysis showed that companies affected by Trump's previous tariffs did worse in the stock market compared to those that were not. This suggests that the uncertainty around tariffs could harm economic growth. Despite these challenges, analysts believe that this uncertainty might be temporary and will not severely damage long-term economic growth. They also note that previous market corrections have often provided buying opportunities for long-term investors. So, this recent downturn might not be the end of the story for the stock market under Trump's administration.