NEW YORK (AP) — Wall Street could soon be in the claws of another bear market as the Trump administration’s tariff blitz fuels fears that the added taxes on imported goods from around the world will sink the global economy.
The last bear market happened in 2022, but this decline feels more like the sudden, turbulent bear market of 2020, when the benchmark S&P 500 index tumbled 34% in a one-month period, the shortest bear market ever.
Here are some common questions about bear markets:
Why is it called a bear market?
A bear market is a term used by Wall Street when an index such as the S&P 500 or the Dow Jones Industrial Average has fallen 20% or more from a recent high for a sustained period of time.
Why use a bear to refer to a market slump? Bears hibernate, so they represent a stock market that’s retreating. In contrast, Wall Street’s nickname for a surging market is a bull market, because bulls charge.
The S&P 500, Wall Street’s main barometer of health, closed 0.2% lower Monday after having been down by as much as 4.7%. It’s now 17.6% below the all-time high it set on Feb. 19.
The Dow industrials fell 0.9%, and the tech-heavy Nasdaq composite, which already was in a bear market, bounced back from an early slide to eke out a 0.1% gain.
The most recent bear market for the S&P 500 ran from Jan. 3 to Oct. 12 in 2022.
What’s bothering investors?
The trade war has ratcheted up fear and uncertainty on Wall Street over how businesses and consumers will respond.
President Donald Trump followed through on tariff threats last week by declaring a 10% baseline tax on imports from all countries and higher tariff rates on dozens of nations that run trade surpluses with the United States.
Global markets cratered the next day, and the sell-off deepened after China announced it would retaliate with tariffs equal to the ones from the U.S.
Tariffs cause economic pain in part because they’re a tax paid by importers that often gets passed along to consumers, adding to inflationary pressure. They also provoke trading partners into retaliating, which can hurt all economies involved.
Import taxes can also cause economic damage by complicating the decisions businesses have to make, including which suppliers to use, where to locate factories and what prices to charge. And that uncertainty can cause them to delay or cancel investments that help drive economic growth.
The tariffs come at a time when the U.S. economy is already showing signs of slowing. Markets are also worried that tariffs could fuel inflation, which recently ticked higher.
