Tariffs And Volatility In The Stock Market: What’s Really Happening?

Oliver Krzeczowski, Walter Payton College Prep, 2026

With the US economy relying on “imports from the world [that] totaled $3.2 trillion in 2022” and a rise in increased tariff uncertainty over the last several months, markets have begun to display fears of economic downturn (USTR, 2023). Since the inauguration of President Donald J. Trump, tariffs have been at the forefront of policy discussion within the media and have had a wide range of positive and negative reactions. Markets, in reaction to this discussion and the proposition of tariffs in general, have experienced a period of high volatility. The S&P 500 has generally reacted negatively to tariffs, yet has rebounded when they have been used as a negotiation tool rather than a measure against imports. So as tariff confusion continues, business owners like Ernest Gontarz find themselves asking questions like, “Will investments be heavily affected solely by tariff policy? Will tariff policy push the national economy into a period of recession? Or worse, stagflation?”  Which is why it’s important to learn more about what tariffs are, and how they can affect investments. 

Tariffs are defined as taxes on goods imported from other countries. They are used to generate government revenue, protect domestic industries from international competition, and as political leverage in issues of foreign policy. Yet within all of these purposes, tariffs raise inflation and prices and decrease corporate revenue, leading to the strong reactions displayed by the market. Portfolio manager Andrew Cupps says that “though these concerns are driving factors of volatility, the uncertainty itself leads to even stronger levels of market movement.” On Liberation day, April 2nd 2025, the government announced 10% baseline taxes on all imports from every country, with some countries like China being dealt higher tariffs at 145%. In reaction to this, the S&P 500 fell over 5% and the Dow Jones Industrial Average fell over 11%. This movement sent shockwaves through investors, yet when deals were made with other countries and tariffs were used as a bargaining tool, markets rebounded and investors provided more positive sentiment.

Overall, as tariff rates continue to fluctuate, firms like Goldman Sachs are predicting that every five-percentage-point increase in the tariff rate is estimated to reduce S&P 500 earnings per share by roughly 1-2% (Goldman Sachs, 2025). Whenever looking at investing and the market it is always important to consider geopolitical and macroeconomic events.

Works cited

https://www.goldmansachs.com/insights/articles/how-tariffs-are-forecast-to-affect-us-stocks

https://ustr.gov/countries-regions#:~:text=The%20United%20States%20is%20the%20largest%20goods%20importer%20in%20the,percent%20of%20total%20goods%20imports 

Ernest Gontarz -  Student and business owner

Andrew Cupps -  Portfolio Manager