Stock markets fell Monday after US President Donald Trump declined to rule out the potential for a recession this year and China’s retaliatory tariffs on US imports took effect. As of midday, the S&P 500 was down more than 2%, while the Nasdaq 100 was down more than 3%.

The market downturn comes after Trump on Sunday said the US was in a “period of transition,” underscoring investors’ growing concern that the US is heading into a recession. Speaking to NBC News on Monday, Trump’s Commerce Secretary Howard Lutnick sought to downplay the president’s comments, saying that “there’s going to be no recession in America.”

Investors and businesses are grappling with increased uncertainty amid Trump’s mercurial trade policy moves and signs of rising inflation. US Treasury yields have fallen as more analysts come to expect that the country’s central bank will cut interest rates sooner than it had previously indicated.

SIGNALS

US businesses are increasingly struggling with uncertainty

Sources: The Wall Street Journal, The New York Times, The Associated Press

While analysts think a 2025 recession is unlikely, “confidence matters, and this isn’t a good way of boosting animal spirits,” The Wall Street Journal’s James Mackintosh wrote. Delays on some of Trump’s promised tariffs may indicate that the administration is “beginning to see the risks” of going too far while the economy is showing signs of strain and Americans are feeling the pressure of higher prices, The New York Times wrote. Still, many businesses, both in the US and abroad, are already struggling to cope: “The misdirection is making it very tough to plan for the year,” one US business owner told The Associated Press.

Trump’s trade policies could weaken the dollar

Sources: The Economist, Business Insider, Chatham House

Donald Trump’s aggressive trade policies could result in a weaker US dollar, a goal for the president that throws “three decades of Treasury orthodoxy [into] question,” The Economist wrote. A weakened dollar — and strengthened global currencies — could backfire, Business Insider wrote: “Although a devalued dollar may play into Trump’s hopes for cheaper US exports, it could upend his separate pledge to keep the greenback the world’s dominant currency.” China and Europe’s economies remain fragile, however, while US tariffs could prompt foreign exchange markets to sell non-dollar currency, a Chatham House analyst wrote.