Odds of Recession Are Soaring in Prediction Markets

We have a new live blog covering market activity on Thursday. You can visit it by clicking here. 

We will be covering all the most important stock market news on what could be a historic Thursday.

Shortly before the market opens, Nasdaq Futures are down 4.64%, S&P Futures are down 3.83%, and Dow Futures are down 3.1%.

The Stock Market is set to open in about 45 minutes. Let’s look at where most major indexes are at 8:45 a.m. ET.

• Nasdaq Futures: -4.00%
• S&P 500 Futures: -3.39%
• Dow Futures: -2.83%

Japan’s Nikkei Index is down about 4.45% in premarket trading. It’s hardly the only foreign market that’s expected to see pain tomorrow.

For example, the VanEck Vietnam ETF (BATS: VNM) is down 8.3% in after-hours trading. The iShares MSCI China ETF is down 3.2%.

Trump’s tariff press conference included tariff rates charged to the United States that are significantly higher than most calculations. For example, Trump said China is charging 67% tariffs on the U.S., and the European Union charges 39% tariffs.

These rates came with the nebulous asterisk that they included ‘Currency Manipulation and Trade Barrier Costs.‘

Market observers have been trying to figure out where these numbers came from, but it appears we have an answer.

The chart below comes from Twitter user Ben Hunt (link here) and shows how the formula ‘Trade Deficit / U.S. Imports almost exactly equals the tariffs Trump claimed each country is charging the United States. You can see this calculation below:

We posted the weighted tariff rates of most developed countries below and they typically fall in the 1-2% range. This explains why Trump’s reciprocal tariffs are so much higher than the actual tariffs any country charges.

Let’s check where futures stand at 6:45 p.m. ET:

• Dow Jones: -938.00 (-2.21%)
• S&P Futures: -188.25 (-3.30%)
• Nasdaq Futures: -820.25 (-4.20%)

Dow Futures have briefly sunk below 1,000 points but have rebounded slightly. As we’ve noted in this live blog, the strongest selling is ‘risk-off’ impacting technology and growth stocks.

Amazon (Nasdaq: AMZN) is currently down 6%, Apple (Nasdaq: AAPL) down 7.1%), NVIDIA (Nasdaq: NVDA) down 4.7%, Tesla (Nasdaq: TSLA) down 6.1%, Meta (Nasdaq: META) down 4.8%, and Microsoft (Nasdaq: MSFT) is down 2.9%.

Earlier tonight, Treasury Secretary said “the equity market selloff is a Mag 7 problem, not a MAGA problem,” which is likely adding even more selling pressure to large stocks beyond tariff headlines.

Estimates are coming out on how large tonight’s tariffs might be.

Evercore/ISI is estimating that the weighted-average tariff rate would be 29% after tonight’s tariff announcements. Prior to the announcements tonight, the weighted-average tariff rate was just over 10%.

How would a blended rate of 29% compare? The highest tariff rate in the past 100 years was about 20% after the passing of the Smoot-Hawley Act in 1930. You can see EvercoreISI’s chart below.

Of course, we’ll see what rates are actually charged and how much of tonight’s announcement is a negotiating tactic in the weeks to come.

As of 6:20 p.m. ET, the Invesco QQQ Trust which tracks the Nasdaq is now down 4.6% after hours. An hour ago, the ETF was down 3.4%.

If the selling continues, there could be a 5% (or larger) sell off in the Nasdaq. As we noted earlier, risk assets are taking the brunt of selling activity as investors flee to safety.

How will U.S. tariffs compare to other countries if the reciprocal tariffs announced today go into effect? Here’s a selection of blended tariff rates on imports for countries around the world according to the World Bank:

• Australia: 1.0%
• Sweden: 1.3%
• Canada: 1.4%
• United States (Previously): 1.5%
• Israel: 2.8%
• United Kingdom: 3.1%
• South Korea: 8.6%

As you can see, if these tariffs go into effect they would put the United States significantly beyond any other industrialized economy.

What stocks are seeing the biggest declines after tonight’s tariff announcements? Here are a few of the most notable names:

• Apple (Nasdaq: AAPL): Down 5.6% due to tariffs on China coming in above expectations.
• Crocs (Nasdaq: CROX): Down 10.8% as the company produces its shoes in Vietnam, a country that had 46% tariffs leveled on it.
• Nike (NYSE: NKE): Down 7% after hours. The company is another tariff ‘loser’ impacted by the steep rates on Vietnam.

Some industries were exempted from reciprocal tariffs like semiconductors. That exemption has led to more muted selling in stocks like NVIDIA (Nasdaq: NVDA). However, NVDIA is still down 3.4% after hours as the Trump Administration has said they’re still considering industry tariffs that could impact the company.