Black Monday bloodbath: As markets crash, what could be the endgame for Trump’s reciprocal tariffs

Black Monday 2.0? Markets Tumble Globally After Trump’s Tariff Spree

Analysts who once dismissed the idea of Donald Trump following through on his tough trade talk are now eating their words. The former U.S. President has doubled down on sweeping new tariffs, sparking fears of a prolonged trade war—and global markets are already reeling.

Warnings about a possible “Black Monday” crash have materialized. The Dow Jones and S&P futures tumbled over the weekend, dragging Asian markets down with them. Tokyo’s Nikkei 225 opened to a nearly 9% loss, while Hong Kong’s Hang Seng dropped 8% in early trade. In India, markets plunged 5% on Monday morning, following their Asian peers. This came despite the American president insisting over the weekend—en route to a golf outing—that the market reaction was temporary and that countries were “dying to make a deal.”

Tariff Turbulence: What Comes Next?

Though Trump has clearly shown that he is serious about tariffs, a growing number of analysts believe they won’t last. One scenario is that stock market pressure and backlash from his political base might push him to scale back. Another is that Trump could use concessions from smaller nations—like Vietnam or Cambodia—as a pretext to declare victory and pull back, at least partially.

There’s also the possibility that Congress may step in, challenging the President’s authority to unilaterally impose such sweeping trade penalties. Legal challenges are already brewing, questioning whether Trump’s use of emergency powers for this purpose is constitutionally valid.

Oversimplified Policy, Complex Consequences

Trump’s tariff rollout appears to be based on a simplistic formula—one eerily similar to what artificial intelligence models like ChatGPT would generate when asked how to “balance” trade imbalances:
T = (Trading partner’s surplus / Country’s deficit) × Base Tariff Rate

The formula assumes that a zero trade balance is the goal, something most economists view as impractical. Real-world trade is far more nuanced. Moreover, implementing such a framework across dozens of countries with different tariffs is proving to be a bureaucratic nightmare.

For example, the EU is facing a 20% tariff, while the UK, just across the English Channel, is hit with only 10%. This could lead to rerouting goods through lower-tariff countries, unless the U.S. enforces stricter rules of origin—a process that would be difficult and costly.

Trump’s tariff regime also appears indiscriminate. Landlocked Lesotho has been slapped with a 50% tariff, despite its tiny economy, simply because it exports diamonds to the U.S. Taiwan, a key U.S. ally, is also targeted, though some exemptions may be made for semiconductor exports.

Ironically, countries like Russia and North Korea have found themselves exempted.

Mixed Objectives and Domestic Blowback

The rationale behind these tariffs has shifted rapidly—from national security to trade deficits to raising revenue for proposed tax cuts. But whatever the reasoning, the domestic fallout is building.

Inflation is likely to rise as imported goods become costlier. That, coupled with growing fiscal deficits, is raising alarms among both Republican lawmakers and financial markets. There is concern that foreign lenders, long content to fund U.S. debt, may begin to pull back—jeopardizing the dollar’s long-standing role as the world’s reserve currency.

Such a shift could be seismic. It would rival the impact of the West’s 2022 decision to freeze Russian assets, which spurred many central banks—including India’s—to move towards physical gold reserves over dollar-based assets.

Meanwhile, the U.S. Federal Reserve’s dovish interest rate trajectory is now in question. If tariffs fuel inflation, the Fed may have no choice but to halt or even reverse its planned rate cuts—despite the potential political fallout during an election year.

Retaliation from Abroad

Studies from institutions including MIT and Harvard suggest Trump’s previous tariffs had little positive impact on U.S. employment. In fact, retaliatory measures from other nations—especially China—hurt American farmers and exporters more than they helped domestic manufacturers. Relief packages for those affected were only partially offset by the revenues generated from the tariffs.

This time, the response from U.S. trade partners has been swift. China has imposed countermeasures, and the EU is expected to follow suit—possibly targeting American digital services. That could drag companies like Meta, Alphabet, and Apple into the fray, especially given they are already under regulatory scrutiny in Europe.

The Bigger Picture

While Trump’s tariffs may offer short-term economic stimulus, experts warn that the long-term consequences could outweigh the gains. If inflation rises, retaliatory tariffs escalate, and investor confidence wanes, the result may be a lasting slowdown rather than a sustainable revival.

At the heart of it all is a fundamental question: Can global trade really be rebalanced with unilateral tariffs and quick-fix math? Or is this just another chapter in a broader geopolitical reshuffling—one that could reshape the world’s economic order?