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United States stock markets plummeted on Monday amid fears that President Donald Trump’s tariff policies might drive the world’s largest economy into recession. After years of impressive growth, America’s economic exceptionalism has been called into question.

Concern over an economic downturn has driven a stock market rout that wiped $1.7 trillion from the S&amp, P 500 – the world’s most-watched equity index. It fell by 2.7 percent, dragging it 9 percent below the all-time high it reached on February 19.

The tech-heavy Nasdaq-100 posted its worst day since 2022, wiping out more than $1 trillion in value. Investors sold shares in the so-called “magnificent seven” – Alphabet, Amazon, Apple, Microsoft, Meta, Nvidia and Tesla.

What caused the slump?

The market selloff comes as Trump’s back-and-forth tariff announcements have unnerved investors and stoked fears that the US economy could be headed for a major slowdown, or even a recession.

Last week, Trump slapped a 25 percent tariff on imports from Mexico and Canada and doubled the rate on Chinese goods to 20 percent, only to announce two days later that he would delay some Mexican and Canadian tariff hikes until April 2.

Trump has also threatened to impose a global regime of reciprocal tariffs: every country will face the same levy it chooses to impose on US goods from April 2. A 25 percent tariff on imports of steel and aluminium is also set to take effect on Wednesday.

Tariffs look set to increase inflation and consumers will bear the brunt of the higher costs. Many Americans could be forced to tighten their belts, which would lower growth and raise unemployment.

Ongoing public sector cuts and geopolitical tensions have also amplified US policy volatility. On CNBC, Holger Schmieding, chief economist at Berenberg Bank, described Trump as an “agent of chaos and confusion”.

“What is coming out of the Oval Office … is just complete indecisiveness, confusion and mixed messaging and the investing community losing confidence”, Peter Tuchman, a stock exchange trader, said in a video posted on X.

What did Trump actually say?

In an interview with Fox News that aired on Sunday, Trump suggested that the risk of an economic downturn – if it were to happen – would be worth it in the cause of the broader economic shifts he is trying to engineer.

“I hate to predict things like that. There is a period of transition because what we’re doing is very big”, Trump said. “We’re bringing wealth back to America. That’s a big thing … It takes a little time, but I think it should be great for us”.

Asked whether he thought tariffs on US imports would increase inflation, he said, “You may get it. In the meantime, guess what? Interest rates are down”.

He also doubled down on his trade protectionist agenda, saying, “We]the US] have been ripped off at levels never seen before, and we’re going to get a lot of it back”.

How has the White House responded?

As Wall Street panicked yesterday, the White House maintained an optimistic outlook, pointing to major investment pledges from corporate leaders.

White House spokesperson Kush Desai said on Monday that CEOs had responded to Trump’s “America First” agenda, which is marked by tariffs and deregulation, by pledging “trillions in investment commitments”. These commitments, he said, “will create thousands of new jobs”.

Meanwhile, in an interview with CNBC on Monday, Kevin Hassett, the head of Trump’s National Economic Council, played down financial market wobbles as “blips in the data”.

Howard Lutnick, Trump’s commerce secretary, told NBC’s Meet the Press: “There’s going to be no recession in America … you are going to see over the next two years the greatest set of growth coming from America”, Lutnick said.

Have Wall Street jitters spread elsewhere?

Asian stocks fell sharply on Tuesday morning, as the previous day’s US market selloff extended globally. Japan’s Nikkei stocks slid about 3 percent, hitting their lowest level since September.

Chinese stocks were also not immune to the downbeat mood. The blue-chip index fell 0.5 percent, while Hong Kong’s Hang Seng Index was 0.8 percent lower. Australia’s benchmark index also dropped by 0.8 percent.

Safe haven assets – which investors flock to in periods of market uncertainty – are now in demand, with the Japanese yen touching a five-month high against the dollar, at 147.07 per dollar. The Swiss franc has also strengthened. Both currencies are considered stable due to their predictable economic backdrops and low inflation environments.

Gold, long considered financially secure, inched up to $2, 895.75 per ounce, within touching distance of the record high it hit last month. Gold is now up 10 percent so far in 2025, after climbing 27 percent last year.

Oil prices, which typically move in tandem with global gross domestic product, fell for a second day on Tuesday. Brent futures, the global benchmark, dropped by 0.65 percent to $68.83 a barrel.

What will happen next?

Unlike Trump’s first term, when cracks in the economy or stock market wobbles often led to policy pivots, the US president seems determined to follow through on restrictive trade arrangements this time around.

In turn, Citi analysts cut their recommendation for US stocks to “neutral” from “overweight”, arguing the US economy may no longer outpace the rest of the world in the coming months.

Goldman Sachs economists last week raised its odds of a recession within the next 12 months from 15 percent to 20 percent, while JPMorganChase has lifted the probability from 30 percent to 40 percent “owing to extreme US policies”.

The yield (or rate of return) on a two-year US government bond, which moves in step with interest rate expectations, fell 0.05 percent yesterday to a five-month low. As such, many expect the US Federal Reserve to lower borrowing costs.

The Fed’s benchmark rate currently sits at about 4.3 percent, which is high by recent historical standards.

Traders are now pricing in a 0.85 percent cut in interest rates from the Fed this year, compared with 0.75 percent basis points on Monday, according to the London Stock Exchange Group. Lower borrowing costs are designed to help spur growth in a slowing economy.

Prashant Newnaha, a senior Asia Pacific rates strategist at TD Securities, told the Reuters news agency that “markets have now gotten the memo that the administration is intent on ripping the band-aid off”.

Since his first day in office, Trump has stated his desire to tame US inflation. At the same time, he’s made trade tariffs central to his presidency. He’s unlikely to achieve both policy aims at the same time.

Kyiv, Ukraine – On Sunday, a top Russian security official in Moscow lauded dozens of servicemen who used an abandoned natural gas pipeline as a tunnel to infiltrate a Ukraine-occupied area in the western Russian region of Kursk.

“The lid of a boiling cauldron is almost closed! Good job”! Dmitry Medvedev, who served as president and prime minister before becoming deputy head of Russia’s Security Council, wrote on Telegram.

But a Ukrainian serviceman deployed in Kursk offered a starkly different version of how the Russians barely got out of the pipeline on Saturday – only to be reportedly killed en masse.

“Some suffocated right]in the pipeline], some turned back. About a hundred came out in our rear, split into two groups and were almost immediately ambushed by our special forces. And]also killed by] a massive squall of artillery”, Evhen Sazonov wrote on Telegram.

However, the Ukraine-occupied area of Kursk shrank last week as Russians retook several villages and farms and moved to encircle Kyiv’s forces in the town of Sudzha.

In part, that happened because United States President Donald Trump suspended military aid to Ukraine – including the sharing of data from reconnaissance satellites, according to a former deputy head of Ukraine’s general staff of armed forces.

The suspension “affects the organisation of warfare in Kursk for Ukraine’s armed forces”, Lt Gen Ihor Romanenko told Al Jazeera.

Trump froze the aid on March 3, five days after a spat with Ukrainian President Volodymyr Zelenskyy in the White House over the latter’s alleged “ingratitude” to Washington.

The suspension also included the delivery of all weaponry and ammunition commissioned by Trump’s predecessor, Joe Biden, that was in transit in Europe.

In the 1990s, the West urged Kyiv to destroy most of its Soviet-era weaponry and ammunition, and only two-fifths of the arms Ukraine uses these days have been domestically manufactured.

Kyiv is adamant that Trump’s decision will only benefit Russian President Vladimir Putin’s war effort.

“We count on the US aid. I think the suspension of this aid would help Putin”, Zelenskyy said on March 3 during an emergency meeting with British Prime Minister Keir Starmer.

Kursk is by far not the only place where Ukraine is facing potential disasters.

Without the satellite data, Ukrainian air defence forces have less time to detect and respond to the launch of swarms of Russian drones that attack civilian areas, Romanenko said.

The drones that distract air defence forces are routinely followed by missiles launched from Russian bombers whose liftoff is also detected by US military satellites, he said.

The lack of satellite data also translates into Kyiv’s diminished capabilities to send its long-range drones to strike military sites, airstrips, ammunition and fuel depots deep inside Russia and in Russia-occupied Ukrainian regions.

“We partially try to solve this by using our data and the data from our allies, the real ones”, Romanenko quipped, referring to the United Kingdom and France – nations that are still aiding Ukraine.

On Sunday, Ukrainian drones attacked a Russian oil refinery in the Volga River region of Samara that sits more than 900km (560 miles) east of the border and produces fuel for fighter jets and bombers.

The attack was pinpointed and did not hit residential areas, according to Russian and Ukrainian media reports.

On Tuesday, Ukraine attacked Moscow with drones, killing at least two people.

But the aid freeze will affect the most crucial element of Ukraine’s defence of residential areas – the Patriot air defence systems that shoot down most of Russia’s cruise and ballistic missiles.

Ukraine has no stockpiles of missiles for Patriots that cost several million dollars each and are produced only in the US.

Since March 3, Russia has launched hundreds of drones and dozens of missiles.

Trump is ‘ rotten to his very core ‘

Some everyday Ukrainians feel gutted by the aid freeze and Trump’s reported demands to recognise the occupied Ukrainian regions as part of Russia.

“Every time I hear explosions, I think – how many more]Patriot] missiles do we have left? When is the roof of my house going to collapse”? Mariya Minchenko, a 27-year-old ambulance paramedic, told Al Jazeera, referring to two massive bombings of Kyiv since March 3.

Standing outside a kindergarten in central Kyiv before picking up her two children, she said her colleagues noticed a spike in the number of heart and panic attacks among the elderly during and after the bombings. “4am is our darkest hour, and now it’s way worse than before” the aid freeze, she added.

“Trump is not just a bad president, he’s a bad human being, rotten to his very core”, Minchenko said.

Ukrainian arms developers have long been trying to wean off Western weaponry.

They boosted the development and production of inexpensive drones that dominate today’s battlefield, largely replacing the traditional, much pricier artillery and tanks.

Ukrainian developers also found themselves on the cutting edge of the development of electronic jamming systems that make enemy drones lose contact with operators and crash.

The area is completely independent of US military aid, according to Yaroslav Filimonov, the CEO of Kvertus, a Kyiv-based company that churns out thousands of advanced jamming systems a month.

“Our enemy is strong, they have strong brains, they’re quick to copycat and scale up our findings”, he told Al Jazeera. “But we win with quality, not quantity”.

Despite the freeze, Kyiv can boast a tiny victory on the eastern front line.

Last week, Ukrainian forces regained the town of Kotlyno near the strategic city of Pokrovsk, where a third of Russian attacks took place in February, according to Oko Gora, an analytical Telegram channel.

The move prevented the Russian takeover of a strategic highway that leads to the Dnipropetrovsk region.

Observers attribute the success to Major-General Mykhailo Drapatyi, who became a new land forces commander in November and managed to streamline coordination between military units.