Investors are finally taking President Donald Trump’s tariffs seriously, with the result being some ugly consequences for stocks. Stocks have chugged along since the election, even notching fresh all-time highs, as the “Trump-lite” narrative — as JPMorgan’s Maia Crook called it Monday — led to investor confidence that the current administration’s pro-growth policies would more than offset any pressures from a global trade war. That narrative took a hit this week, with stocks taking a nosedive Monday after Trump’s confirmation of 25% duties on Canada and Mexico, as well as an additional 10% tariff on Chinese goods, jarred investors. On Tuesday, the slide continued, after Canada, Mexico and China announced retaliatory tariffs on U.S. goods. “The guardrail of risk markets looks to have come off as a nearly 5% tumble in U.S. equity prices in just the past two weeks does not seem to have tempered the administration’s tariff goals,” Crook, a former researcher at the Federal Reserve, wrote on Monday. “The risk of our ‘extreme U.S. policies’ scenario have risen.” .VIX YTD mountain VIX volatility index over the past year. As of midday trading Tuesday, the Dow Jones Industrial Average was down more than 700 points, or 1.7%. The S & P 500 tumbled more than 1.7%, leaving it negative in 2025. The Nasdaq Composite , down more than 1.5%, entered a correction after falling more than 10% from its recent high. The CBOE Volatility Index — known as Wall Street’s fear gauge — rose above 25, its highest level of 2025, with 20 typically indicating elevated fear and volatility on the Street. Duration and pain Many investors who remain confident that Trump will eventually lift tariffs, potentially boosting stocks in the back half of the year, urge calm amid the turmoil. Clark Geranen, chief market strategist at CalBay Investments, an asset manager in Danville, Calif., noted that the S & P 500 is at an “attractive entry point” now that it is “noticeably” under 6,000. He anticipates double-digit returns for the broader market this year. But the question now for many traders is how long the tariffs will continue, and how much pain the market will feel. “High level, we do expect that there will be continued negotiations with Canada and Mexico,” said Shannon Saccocia, investment chief at NB Private Wealth, a division of Neuberger Berman. “We don’t anticipate a long, protracted trade war with Canada and Mexico. We don’t expect there to be a significant increase in inflation.” “But, we acknowledge that if there is more of a protracted period of tariffs, and retaliatory tariffs, that we could see an impact to U.S. growth,” Saccocia continued. Saccocia added that her outlook could get more grim if the Trump administration starts to frame tariffs as a way to generate revenue, rather than as a negotiating tool. Don’t believe in the ‘Trump put’ Wolfe Research’s Tobin Marcus on Monday wrote that he expects that the pain could get worse before it gets better, and urged investors not to believe in a quick and easy resolution. “Duration and pain tolerance are still big questions, but we’re not believers in an easy-breezy ‘Trump put,'” said Marcus, head of U.S. policy and politics at Wolfe. “How long might Trump be willing to keep these tariffs in place, what might he want to accomplish before changing course, and what level of pain might push him off of this policy? No one knows, certainly not Mexican President Sheinbaum and Canadian PM Trudeau.” “We assume these tariffs can’t stay in place forever, as this will be much more painful than the China tariffs, both due to the extent of North American interconnection and due to the structure of the tariffs,” Marcus continued. “But we don’t think Trump would have approached it this way if he weren’t prepared for some pain. Could a 20% market drawdown push him off this path? Maybe. 5%? We doubt it.”
