Tariffs unveiled against dozens of countries by President Donald Trump Wednesday sent stock markets reeling as the levies are seen damaging US and global economic growth even as they push inflation higher.

Across Wall Street economists pronounced the tariff outcome as worse than expected. At the same time, rather that removing uncertainty, as some pundits had predicted, the sweeping tariff regime adds an entirely new level of short- and long-term unknowns to the global economic outlook.

In the immediate future, however, the impact is seen as broadly negative.

“Recession risk over the next year has climbed to at least one third,” says Preston Caldwell, Morningstar’s senior US economist. “We’ll be reducing our GDP growth forecast for 2025 and 2026 by around 0.5% each.”

Caldwell emphasizes that the scope of the tariff increases makes it difficult to assess just how deep the damage will be. “This kind of regime shift is so unprecedented the historical data and models derived therefrom are only a best guess,” Caldwell says. “Altogether, the announced hikes today – including autos and other previously announced ones – will take the average US tariff rate somewhere north of 20%, the highest in over a century.”

“The bigger factor is the uncertainty weighing on spending over a 1-year time horizon. Perhaps longer. Are firms really going to invest in US manufacturing with the possibility that midterms or 2028 election could bring a reversal in tariffs? If Congress had enacted these tariffs it would give it a bit more staying power and credibility. But this is really a worst of every world scenario.”

Stock markets reacted harshly to Trump’s announcement. S&P 500 futures fell 3% in evening trading, and Japan’s Nikkei 225 dropped more than 3%.

Companies that rely heavily on imported goods from Southeast Asian countries that were slapped with higher than expected tariffs took an especially large hit in the after-hours trading. Names such as Apple AAPL, Nike NKE, Amazon AMZN and Gap GAP were among those stocks with steep declines.

“Investors are giving the reciprocal duties a big thumbs-down,” wrote Sal Guatieri, senior economist at BMO.

In the bond market, US Treasury yields fell sharply. Investors turn to US government bonds as a safe haven, as well as on expectations of a slowdown in economic growth. The yield on the key 10-year US Treasury note fell to 4.08% from 4.20% before Trump unveiled his plans.

Dominic Pappalardo, chief multi-asset strategist at Morningstar Investment Management, says the impact of tariffs on the economy could push the Federal Reserve toward looser monetary policy. “Today’s announcement … may be enough to allow the Fed to shift their focus more toward economic weakness than inflation,” he says. “If that’s the case, the Fed may decide to resume interest rate cuts sooner than previously expected.”

However, even that isn’t a clean call as tariffs could contribute to renewed inflation pressures. “The Fed has been trapped between supporting economic activity and fighting inflation and unfortunately today’s news puts additional pressure on both,” he says.