Markets crashed in the wake of President’s Donald Trump announcement of a sweeping tariff regime Wednesday that shocked trade experts and investors alike.

Economists have warned that Trump‘s tariffs have heightened the likelihood of a recession, with one forecaster predicting it outright.

The selloff erased over $5 trillion in market value in the S&P 500 for the two trading days since Trump announced his tariffs.

The broader economy was already on shaky terrain due to fears over Trump’s economic policy and the sweeping changes ushered in by the Republican administration’s trade stances that could charge downward consumer sentiment.

Here’s what we know about what happened in the markets and what could come next.

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The markets nudged up ahead of Wednesday’s tariff announcement but plunged in its wake.

The Dow Jones closed nearly 8% down, the S&P closed over 9% down and the NASDAQ closed 10% down.

China hits back on tariffs, Europe set to announce their response

China fired the first response to the tariff regime, announcing it will impose reciprocal 34% tariffs on all imports from the U.S. Friday.

“This practice of the U.S. is not in line with international trade rules, undermines China’s legitimate rights and interests, and is a typical unilateral bullying practice,” China’s finance ministry said in a statement.

The European Union will likely approve a first set of targeted countermeasures on up to $28 billion of U.S. imports in the coming days, Reuters reported Sunday.

The European Commission, which coordinates EU trade policy, will propose to members late on Monday a list of U.S. products to hit with extra duties in response to Trump’s steel and aluminum tariffs rather than the broader reciprocal levies.

It is set to include U.S. meat, cereals, wine, wood and clothing as well as chewing gum, dental floss, vacuum cleaners and toilet paper.

Investors fear for worst, hope for reprieve

CNBC’s Jim Cramer warned on “Mad Money” Friday that the “man-made obliteration” of the markets could lead to selloffs in the vein of either the COVID-crash, the dot-com bust of the early 2000’s or − in the worst case − a 1987-style “Black Monday” event that saw the Dow Jones crash 22.6% in one day.

“If the president doesn’t try to reach out and reward these countries and companies that play by the rules, then the 1987 scenario − the one where we went down three days and then down 22% on Monday − has the most cogency,” Cramer said.

Billionaire hedge fund manager Bill Ackman − who endorsed Trump in the 2024 election − posted on X that he believed it was possible that the tariffs could be postponed.

“The risk of not doing so is that the massive increase in uncertainty drives the economy into a recession, potentially a severe one,” Ackman wrote.

JP Morgan chief economist Michael Feroli forecasted a recession caused by Trump’s tariffs and an unemployment rate that is pushed over 5% in the second half of 2025 in a note to the firm’s clients obtained by Yahoo Finance.

“We now expect real GDP (gross domestic product) to contract under the weight of the tariffs,” Feroli wrote Friday.

The firm predicted GDP contraction of 1% in the third quarter of the year and 0.5% in the fourth quarter.

Trump administration says no relief coming

Trump administration officials messaged that the tariffs are to be implemented, and are not up for negotiation, across the Sunday political shows.

“The tariffs are coming. He announced it and he wasn’t kidding. The tariffs are coming, of course they are,” Commerce Secretary Howard Lutnick said on CBS’s “Face the Nation.”

Treasury Secretary Scott Bessent reinforced the point on NBC’s “Meet the Press.”

“They’ve been bad actors for a long time and it’s not the kind of thing you can negotiate away in days or weeks,” Bessent said. “I think that we are going to have to see the path forward. Because, you know, after 20, 30, 40, 50 years of bad behavior, you can’t just wipe the slate clean.”

Contributing: Jim Sergent, Carlie Procell, Paul Davidson − USA TODAY; Reuters