S&P 500 Analysis: Impact of Trump Tariffs

This comprehensive analysis examines the current downturn in the S&P 500 following President Donald Trump's recent implementation of global tariffs. By analyzing historical data on similar economic events and market downturns, we have identified potential scenarios for how low the S&P 500 could go and estimated timelines for recovery to previous levels.

Key Findings:

• Current Status: As of April 7, 2025, the S&P 500 stands at 5,062.25, representing a 17.61% decline from its recent high of 6,144.15.
• Potential Minimum Levels: Based on our analysis of historical tariff events and Monte Carlo simulations, we project the S&P 500 could decline to:
  • Mild Scenario (25% probability): ~5,222 (15% decline from peak)
  • Moderate Scenario (50% probability): ~4,608 (25% decline from peak)
  • Severe Scenario (20% probability): ~3,994 (35% decline from peak)
  • Extreme Scenario (5% probability): ~3,072 (50% decline from peak)
• Recovery Timeline: Our analysis suggests the following recovery timeframes to previous highs:
  • Rapid Recovery (20% probability): ~3 months from market bottom
  • Moderate Recovery (50% probability): ~9 months from market bottom
  • Slow Recovery (25% probability): ~18 months from market bottom
  • Protracted Recovery (5% probability): ~36 months from market bottom
• Most Likely Outcome: With 50% confidence, we project the S&P 500 will recover to previous highs between Q1 and Q3 2026, assuming a moderate scenario that resembles the 2018-2019 US-China trade war but with broader tariff implementation.

President Trump's recent tariff policies represent a significant escalation compared to previous trade actions:

• Baseline Global Tariff: 10% tariff on all imports from all countries
• China-Specific Tariffs: Up to 60% on Chinese imports
• Targeted Country Tariffs: Higher rates for specific countries including Mexico, Canada, and Vietnam
• Implementation Timeline: Immediate implementation with limited exemptions
• Stated Objectives: Reducing trade deficits, protecting American industries, and pressuring trading partners

These tariffs are broader in scope and higher in magnitude than those implemented during Trump's first administration (2017-2021). The comprehensive nature of these tariffs has triggered concerns about global supply chain disruptions, inflationary pressures, and potential retaliatory measures from trading partners.