Trump's tariffs have had huge effects, but what specifically are they?

In a move that has upended global markets and sent financial institutions into defensive mode, President Donald Trump unveiled sweeping new tariffs on imports last week, escalating tensions with U.S. trading partners and prompting fears of a broader economic slowdown.

Speaking aboard Air Force One, Trump defended the measures as necessary "medicine" for what he described as longstanding trade imbalances. But in the hours and days that followed, the consequences were swift — and global... Here's what's happened.

1. A global sell-off

The most notable – and newsworthy – effect was that stock markets from New York to Shanghai reeled. 

The S&P 500 shed more than 10 percent in two days, erasing nearly $5 trillion in value. Germany's DAX plunged 9.4 percent, while the Hang Seng in Hong Kong dropped more than 13 percent — its sharpest fall since the 1997 Asian financial crisis. 

According to Bloomberg, nearly $9.5 trillion in value was wiped from global equities – but the damage didn't stop there. 

Australia's ASX 200 shed over $100 billion in value within hours of opening, and the British pound and Australian dollar both fell sharply against the U.S. dollar. 

2. Hedge funds slam the brakes

While public-listing stock exchanges grabbed the headlines, in private financial circles, hedge funds scrambled to limit losses. Some, including Spring Mountain Pu Jiang Investment Management, liquidated entire portfolios to avoid margin calls, while others cut leverage and shifted assets to cash or safe-haven bonds.

Others saw opportunity in the panic. Firms like DE Shaw and Marshall Wace increased short positions on companies expected to be hit hardest — including automakers and luxury retailers — anticipating sharp drops in consumer demand under a trade war regime.

3. Corporate America resets expectations

The shockwaves extended beyond investors. Analysts at Jefferies and other firms noted that the tariffs gave large tech and consumer companies "cover" to revise their earnings forecasts downward — in some cases, dramatically.

Meta, Microsoft and Amazon all hinted that their Q2 growth may fall short of previous guidance, citing supply chain disruptions and weakening consumer confidence.

4. Recession warnings intensify

Goldman Sachs raised the likelihood of a U.S. recession this year to 45 percent, citing the sharp tightening in financial conditions and the prospect of prolonged trade friction.

Though the White House insists the tariffs are a negotiating tactic, the scale of the action has triggered widespread concern. Over 50 governments have reportedly contacted the U.S. Trade Representative's office to begin emergency discussions aimed at avoiding further escalation.

5. Billionaires take the hit

The fallout wasn't limited to governments and fund managers. According to Bloomberg's Billionaires Index, the world's 500 richest people lost a combined $187 billion in 48 hours. Meta CEO Mark Zuckerberg alone saw $12 billion wiped off his net worth; X owner and Trump sidekick Elon Musk lost nearly $9 billion. 

In Asia, Chinese tech and retail magnates were among the hardest hit, with Tencent's Ma Huateng and Alibaba's Joe Tsai each losing over $4 billion. Luxury tycoons and auto CEOs across Europe also saw shares — and personal fortunes — tumble.

6. Debt markets flash red

As equities plunged, investors rushed into U.S. Treasury bonds, driving yields sharply lower. The 10-year yield fell below 4 percent — a sign that markets expect the Federal Reserve to cut interest rates soon. 

But the deeper story lies in credit markets. Corporate bond spreads have widened to pandemic-era levels, and several major debt offerings were pulled after buyers demanded higher yields. Companies may soon find it harder — and more expensive — to borrow.

If trade tensions persist, analysts warn that tightening credit could choke off investment and tip heavily indebted firms — or even sovereigns — into distress.