The Collapse of the U.S. Stock Market: A Warning Bell for the American Economy and the Chain Reaction in the Global Market

I. Background and Causes of the Stock Market Crash

In April 2025, the U.S. stock market experienced severe turmoil, with all three major indices plummeting and the Nasdaq Composite Index entering a technical bear market. The immediate trigger was the Trump administration’s announcement of “reciprocal tariffs” on all trading partners. This policy sparked panic among global market participants, amplifying investors’ concerns about the future of the U.S. economy and prompting a massive sell-off of stocks.

From an economic perspective, the U.S. consumer spending in January and February was sluggish, with core inflation rising by 2.8% year-on-year and economic growth showing signs of weakness. Additionally, uncertainties surrounding Federal Reserve policies further exacerbated investor anxiety.

II. The Impact of the Stock Market Crash on the U.S. Economy

1. Eroded Market Confidence: The stock market crash severely dented investor confidence, driving the Volatility Index (VIX) to its highest level since April 2020. This panic could further suppress consumption and investment, negatively impacting economic growth.
2. Corporate Profitability Undermined: The technology, automotive, and financial sectors were hit the hardest. For example, the market value of tech giants like Apple and Amazon evaporated by over 2 trillion U.S. dollars during the crash. Declining profit expectations could further affect their investment and expansion plans.
3. Increased Risk of Economic Recession: Economists predict that the tariff policy could reduce the U.S. GDP growth rate to below 1% in 2025. The Federal Reserve may be forced to cut interest rates to counter the risk of economic recession.

III. The Impact of the Stock Market Crash on the Global Economy

1. Global Stock Market Resonance: The U.S. stock market crash triggered a chain reaction in global stock markets, with Asia-Pacific and European markets also being affected. For example, the Nikkei 225 Index fell by more than 5% over two days, and the Korea Composite Stock Price Index (KOSPI) fell by over 2%.
2. Flight to Safe-Haven Assets: Amid market instability, investors flocked to safe-haven assets, driving gold prices to record highs and lowering the yield on 10-year U.S. Treasury bonds. This indicates that global investors are increasingly concerned about the economic outlook and are reducing their risk appetite.
3. Disruption of Global Supply Chains: The Trump tariff policy has escalated global trade tensions, raising concerns about the potential breakdown of global supply chains. This not only affects U.S. companies but also impacts the global industrial chain, potentially leading to a slowdown in global economic growth.

IV. Outlook for the Future

The collapse of the U.S. stock market is the result of the combined effects of U.S. economic policy uncertainty and the fragility of the global economy. In the short term, the market may continue to experience volatility. In the long run, the U.S. needs to re-evaluate its trade policies to avoid further destabilizing the global economy. At the same time, countries around the world should strengthen cooperation to jointly address the challenges posed by trade frictions and promote sustainable global economic development.

The stock market crash is not only an “earthquake” in the market but also a profound reflection on U.S. economic policies. In the context of globalization, any unilateral economic policy can trigger a chain reaction in the global market, ultimately harming the economic interests of all countries.