When asked in early March whether the administration had paused certain tariffs on Canada and Mexico in response to a stock sell-off, Donald Trump replied that he was “not even looking at the market, because long-term the United States will be very strong with what is happening here.”

Contrast Trump 45, forever eager to point to stock market strength as evidence of the good his presidency was doing. To wit, on August 3, 2017, he tweeted that “business is looking better than ever with business enthusiasm at record levels. Stock Market at an all-time high. That doesn’t just happen!” In December 2019, at around the time that Covid-19 was emerging from wherever it emerged, 45 exulted that the “Trump stock market rally [was] far outpacing past US presidents,” a claim less exaggerated than many from Trump.

Trump-watchers from both right and left fretted that the president was paying too much attention to the markets, whether in his dealings with China or in his backtracking on a threat to close the southern border in 2019. But investors were not complaining. The U.S. stock market hadn’t been doing much in the year or so before Trump was elected the first time, but his promises and policies fired up the markets, and the free fall that accompanied the pandemic was quickly reversed by the Fed’s “free money” and massive infusions of cash.

The S&P 500 rose by 67 percent during Trump’s first term: a fine result, if edged out by Reagan’s second term, beaten more substantially by Clinton (twice), and — thanks to the post-financial-crisis rebound — Obama’s first term. The story is not too dissimilar for the Dow Jones Industrial Average. But when it comes to the tech-heavy Nasdaq, Trump 45 (+ 137.6 percent) sees off all challengers.

Times change. Between Trump’s second inauguration and April 3, the day after “liberation day,” the S&P 500 had fallen by some 10 percent, the worst start for a president over an equivalent period in a quarter century, and a striking reversal of fortune after the strong market that marked the weeks preceding the beginning of his second term, taking share prices to levels that, judging by a tweet he posted a few days after Trump’s big tariff announcement, JD Vance must have considered “inflated.” I doubt that Trump would have agreed. Normally, there ought to be a limit to the extent to which a president should be faulted or (take note, Trump 45) credited for the stock market’s performance during his administration, and after the strong markets during the final years of the Biden presidency there were good reasons to expect the pace to ease. Nevertheless, the blame for much of the current slump lies with the president, some of his team, and the way the launch of an ill-prepared, poorly thought-through trade war has overlapped with a dangerous brawl within NATO.

The market rallied on Trump’s election as investors celebrated the approach of the (formal) conclusion to the Biden presidency, the defeat of Kamala Harris, and, they reckoned, a reprise of Trump’s first term. But sentiment began to sour with the realization that Trump envisaged his second term as a very different adventure.

There is a tendency, at least among those whose 401(k)s are a respectable distance away from their holders’ retirement age, to think of turmoil in the stock market as some bust-up among the perpetually hysterical. But no one should be complacent about what’s taking place now.

In an attempt to persuade the skeptical that the stock market’s ructions do not matter overmuch, Treasury Secretary Scott Bessent told Tucker Carlson that the “top 10 percent of Americans own 88 percent of equities. Eighty-eight percent of the stock market. The next 40 percent owns 12 percent.” Translation: This is a problem for rich folk. Except that’s so only if wealth distribution is all that counts — but it’s not. According to a Gallup survey published in May 2023, 61 percent of American households (including 29 percent with incomes under $40,000) have some exposure to the stock market, whether directly or through mutual funds, exchange-traded funds, 401(k)s, or the like. It will be of no comfort to them that some rich person is losing more money than they are. It’s worth adding that, though only about 2.5 percent of Americans held stocks in 1929, the year of the great crash, that did not spare countless numbers of them from the Depression that the Wall Street meltdown did so much to cause.

Lurking just beneath suggestions that less attention should be paid to stock market woes is the conviction, shared by populists on both left and right, that the U.S. is “over-financialized.” And lurking beneath that is the conviction — a venerable populist conspiracy theory — that Wall Street and Main Street are at odds, with the former parasitic on the latter, rather than different parts of the engine that drives the American economy forward. Perhaps the truth about the U.S. economy is more easily visible from beyond its shores. The EU is not known for lavishing praise on the American way of business, making it all the more striking that, in a recent report on the bloc’s failing competitiveness, Mario Draghi, a former Italian prime minister and past president of the European Central Bank, noted how much the success of the U.S. tech sector owed to American financial markets.

But this is all rather academic. However great the reservations that some may have about the role played by the financial sector in the U.S. economy, that is the reality the administration will have to work with for now. And different markets — bonds, stocks, currency, and gold — are all sounding alarms too insistent to be wished away.

As much as financial markets are mocked (not infrequently with some justification) as casinos where overpaid rent-seekers speculate with other people’s money, the signals they send are too valuable to be lightly ignored. To state the obvious, these markets are for the exchange of securities, currencies, or surrogates such as gold. As Friedrich Hayek would have explained (more elegantly than I), the prices at which they trade are, in a sense, the distillation of market participants’ collective opinion of a security’s worth at that moment. As a consequence, they act as an invaluable conduit of information, albeit imperfect: people buy or sell stocks for all sorts of reasons. Some, for example, may care more about dividends than about capital appreciation, others may focus on valuation, others may choose to buy because of issues unconnected with a share’s intrinsic qualities. “When I see a bubble forming,” said George Soros, “I rush in to buy, adding fuel to the fire. That is not irrational.” Investors may scale back their portfolios regardless of the quality of the stocks therein if they see a sell-off ahead, sending yet another signal of use to others wondering whether to buy, sell, or hold.

Interpreting how a stock or the broader indices will fare is art as much as it is science, leaving plenty of room for debate. That, as the saying goes, is what makes a market. But there can be no doubt that most investors are appalled by the Trump administration’s zombie McKinleyism. Pause higher tariffs and stocks jump, ratchet up rates (or threaten to do so) and stocks drop — reactions that relate to both short-term concerns and worries over the longer haul.

Investors, businesses, and consumers all hate uncertainty (consumer confidence hit a twelve-year low in March), and by mid-April the St. Louis Fed’s Economic Policy Uncertainty Index had spiked far past its pandemic and financial-crisis peaks. For now, no one knows for sure what America’s final tariff regime will look like, how everyone will adjust to it, and what retaliation will be taken against it. As a result, from stores to the C-suites, people will cut back on spending, in many instances even before the tariffs start to bite. They will prefer to “wait and see.” That will increase the chances of recession, both in the U.S. and abroad, a slowdown that would be made more painful by rising prices as earlier tariff rounds make themselves felt.

Then there’s the dragon in the room — China. That the U.S. is in some areas overly dependent on Beijing is beyond dispute, and so is the fact that “decoupling” has proceeded too slowly. The tool to fix that should be a scalpel, not a chainsaw, but Trump’s seeming preference for the latter threatens yet more chaos, thus reinforcing the case for wait and see.

And the fear of chaos does not stop there. It increasingly appears that, as with NATO, Trump’s tariff agenda goes beyond the rebalancing he has been demanding. To his credit, his pressure has led NATO’s European members to finally embark on serious rearmament, something his predecessors had not achieved. But there are signs that this victory is not enough for him, and that he is eyeing a reworking of the global geopolitical order that could leave Europe on its own — an invitation to mischief-making (or worse) from the East.

Similarly, there is a good argument (there’s no need to add the ludicrous claim that VAT, the value-added tax, is a tariff) that imports from the U.S. are treated unfairly by some of our trading partners (and that is before taking into account the EU’s predatory, protectionist use of “antitrust” against American tech companies). The answer ought to be to target a mutual reduction in tariffs, but once again Trump seems to have a more profound change in mind, rooted in his curious conviction that trade is a zero-sum game. This (mercifully) would fall well short of any adoption of autarky but would still rein in the globalization that has been an instrument of American power and prosperity since 1945. And to what end?

Shock that what we may be witnessing is the dismantling of the American-led order in trade and defense, basically on the say-so of one man, lies, I suspect, behind a market collapse that could go far beyond equities. The mark of a truly serious crash — and with it the danger that something in the system will snap — is when the usual correlations between asset classes break down. When the price of equities falls, the price of bonds (which are generally seen as safer, with Treasuries being the safest) typically rises as interest rates decline. But shortly after the proclaimed liberation day, the flight to safety went in unaccustomed directions, away from Treasuries, away from the dollar, and toward alternatives such as gold (which hit new highs) and German government bonds, a shift that, if sustained, would add to this country’s debt burden, hold back its (supposed) reindustrialization, and give inflation an extra fillip. Ominously, the dollar decline was also the opposite of what introducing tariffs is meant to do. Normally an anticipated or actual decline in imports would boost the dollar, as would a hike in U.S. interest rates. These (and other) moves have led to talk of capital flight.

And this is only a foretaste of what would happen in the financial markets should America’s retreat into itself proceed much further. And as for what would happen outside them, well . . .