Global markets have experienced a significant downturn, largely attributed to the unwavering stance of U.S. President Donald Trump on tariffs, with market forecasts being drastically revised downward. Following the announcement of what Trump dubbed “Liberation Day” last week, the S&P 500 saw its worst two-day decline since March 2020, evaporating over $5 trillion in market value and pushing the Nasdaq 100 into bear market territory.

Today, global stocks continued their steep descent. Asian markets faced their worst day since 2008, and Europe’s Stoxx 600 index plummeted by 5%. U.S. futures are pointing to another harsh sell-off, with predictions of a 3.5% drop in the S&P 500.

Analysts fear that if this trend persists, it could lead to the most substantial three-day fall in the index since the Global Financial Crisis, pushing it further into bear market territory. Bill Gross, former chief investment officer at Pacific Investment Management Co., described the event to Bloomberg as a critical economic and market crisis, akin to the end of the gold standard in 1971, but with immediate adverse effects.

Former Treasury Secretary Lawrence Summers expressed concerns over the magnitude of the market movements. Posting on X, he noted, “This was the fourth largest two-day move since World War II,” referencing similar past crashes such as the 1987 stock market crash, the 2008 financial crisis, and the COVID-19 pandemic. He advised that the significant downturn indicated looming troubles, urging extreme caution.

At present, few analysts are advocating buying the dip. Bank of America strategist Michael Hartnett recommended shorting risk assets until Trump shifts focus from tariffs to tax cuts. In the event of a recession, he suggested that investors should wait until the S&P 500 falls to the 4,800 to 5,000 range before re-entering the market.

A critical point in the coming days will be whether the White House opts for a graceful exit strategy or decides to escalate the situation further.

This Saturday, baseline tariffs of 10% on all countries were activated, set to increase with higher reciprocal tariffs by Wednesday. China is expected to impose 34% retaliatory tariffs by Thursday.

Despite the market upheaval, many remain hopeful that Trump, known for “The Art of the Deal,” will find a way to alleviate the pressures. Over the weekend, more than 50 countries reached out to the U.S. administration seeking negotiations.

Capital Economics anticipates that the President will soon announce several deals to lessen tariffs on the most affected countries, with more agreements expected in the coming months.

Should Trump persist with his threats to impose even harsher tariffs on countries that retaliate, the plummeting stock markets could quickly lead to a collapse in household and business confidence, potentially driving the U.S. economy into recession within months.

Jim Reid from Deutsche Bank highlighted the global implications of a steadfast U.S. administration, noting, “At the moment there are few signs they are backing down which will likely signal more market turmoil ahead. Rarely if ever have the next few days been so important.”