Trade Wars Could Push Market Down 20%

Core Viewpoint - The potential trade war initiated by President Trump's tariff plans could lead to a significant downturn in the U.S. stock market, with estimates suggesting a drop of up to 20% in the S&P 500 due to heightened tariffs on major trading partners, particularly China [2][5]. Group 1: Tariff Implications - President Trump's proposed tariffs on China could reach as high as 100%, significantly impacting U.S. companies that rely on Chinese imports, such as Walmart, which sources approximately 60% of its merchandise from China [3][5]. - The initial tariff plans included raising tariffs on China to 54%, with discussions of a potential 245% tariff, which would severely affect the economies of major trade partners like Canada and Mexico [2][4]. Group 2: Economic Impact - A trade war with China is expected to have immediate and widespread effects on the U.S. economy, potentially leading to inflation rates similar to the 9% level experienced in mid-2022, which severely diminished consumer purchasing power [2][7]. - The uncertainty surrounding tariff negotiations has created volatility in the stock market, as the unpredictability of presidential decisions complicates forecasts for many companies and industries [7][8]. Group 3: Retaliation Risks - China may retaliate against U.S. companies operating within its borders, which could include major retailers like Starbucks and Walmart, further complicating the trade dynamics and impacting their operations [6][9].