By Vineet Kumar 
Why Did the US Stock Market Fall? Worst Day in 2025
The US stock market experienced a sharp decline on Friday, marking its worst trading day of 2025. The Dow Jones Industrial Average and S&P 500 both fell by 1.7%, while the Nasdaq composite dropped by 2.2%. This sudden selloff was driven by weaker-than-expected economic data, rising inflation concerns, and growing uncertainty surrounding President Donald Trump’s latest trade policies.
Business Activity Slows to a Crawl
A report from S&P Global revealed that US business activity has slowed dramatically, reaching a 17-month low. The services sector, which contributes significantly to the economy, saw an unexpected contraction. Many businesses cited increasing uncertainty over Trump’s trade policies, potential new tariffs, and domestic spending cuts as key factors dampening confidence.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, stated, “Companies report widespread concerns about the impact of federal government policies, ranging from spending cuts to tariffs and geopolitical developments. Sales are reportedly being hit by uncertainty, and prices are rising due to tariff-related cost increases from suppliers.”
Inflation Fears Add to Market Jitters
Inflation concerns further rattled investors, as a University of Michigan survey showed that consumers are bracing for higher costs due to possible tariffs. Since tariffs function as taxes on importers, major retailers like Walmart are expected to pass these costs onto consumers, driving up prices across essential goods.
The tumble in business activity is a clear signal that both businesses and consumers are growing anxious about the administration’s policies. Initial optimism following Trump’s election has faded, replaced by concerns over regulatory uncertainty, government spending cuts, and trade disruptions.
Trump’s Trade Policies Fuel Market Uncertainty
The administration recently imposed a 10% tariff on Chinese imports, while a 25% levy on Mexican and Canadian goods has been temporarily suspended until March. Additionally, tariffs on steel and aluminum have risen to 25%, with Trump hinting at potential 25% tariffs on autos, semiconductors, and pharmaceutical imports.
Meanwhile, federal government spending reductions have led to thousands of job losses, particularly in the scientific and environmental sectors, due to budget cuts from the newly formed Department of Government Efficiency (DOGE), led by billionaire Elon Musk.
Bond Market Reacts to Economic Concerns
Following the weaker-than-expected economic reports, the bond market also saw a sharp reaction. The 10-year Treasury yield fell from 4.51% to 4.41%, reflecting investor flight to safety amid rising uncertainty. While lower interest rates can stimulate the economy, they may also contribute to inflationary pressures.
What’s Next for the US Stock Market?
Market experts believe that ongoing trade policy shifts and economic data will continue to drive volatility. With inflation risks mounting and businesses hesitating due to policy uncertainties, investors will closely watch upcoming economic reports and Federal Reserve decisions.
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