Market Turmoil Follows Trump’s Tariff Announcement as Stocks Plunge

The recent “Liberation Day” declared by President Donald Trump is shrouded in uncertainty, but one thing is evident: billions of dollars tied up in brokerage accounts have been affected. The president’s unexpected announcement of a blanket 10% tariff on all imports, along with increased taxes on key trading partners, sent shockwaves through the investing community.

After a modest increase in regular trading on Wednesday, the situation turned dire when after-hours trading commenced. Major stocks showed significant declines, with Shopify tumbling by 9%, and both Tesla and Apple dropping 7%. Nvidia saw a 5% decline as well. Other members of the “Magnificent Seven,” which have been pivotal to the bull market in 2023 and 2024, also experienced heavy losses. The magnitude of this sell-off could be unprecedented in the history of after-hours trading.

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This drastic sell-off appears to be largely driven by emotional reactions to the announcement and the broader economic implications it represents. The Trump administration is urging Americans to accept some economic hardship now, suggesting that this strategy will ultimately bolster the U.S. economy in the long run. Officials argue that these tariffs will reshore businesses, reduce the trade deficit, and lessen reliance on foreign imports.

With stocks at historical peaks just weeks ago, it is understandable that investors are anxious following the plunge in values.

In challenging times like these, it is prudent to consider the wisdom of Warren Buffett, the CEO of Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) and widely regarded as one of the greatest investors in history. Two key aphorisms from Buffett are particularly relevant now.

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Buffett on Market Declines

Buffett’s insights on value investing provide clarity during market volatility. He once stated, “If they buy a Stock and they think if it goes up it’s wonderful, and if it goes down it’s bad — we think just the opposite. When it goes down we love it, because we’ll buy more.”

This philosophy might seem counterintuitive but is rooted in solid reasoning. For investors who plan to buy stocks, a price decrease presents an opportunity to purchase more shares for the same investment amount.

It’s essential to remember that investing means putting money into a company. If the fundamental prospects of that business remain intact, buying shares at a lower price represents a better deal than before.

Elon Musk, CEO of Tesla, echoed this sentiment in recent remarks urging his employees not to panic during stock fluctuations: “So, Tesla Stock goes up, and it goes down. But, actually, it’s still the same company.” He pointed out that it’s the perception of future performance that changes, not the fundamentals of the company itself.

While tariffs may create immediate challenges for numerous leading stocks and the economy, their long-term impacts remain uncertain. The durability of these tariffs is also unknown.

Long-term investors should maintain focus on their investment horizons, distinguishing their strategies from day traders seeking quick profits.

Buffett on Investing in American Stocks

Buffett has consistently supported American capitalism, emphasizing the value of U.S. stocks. After the collapse of Lehman Brothers in 2008, he encouraged investors through a New York Times op-ed to “Buy American. I am.”

In his annual letter to shareholders, he declared, “I have depended on the success of American businesses, and I will continue to do so.” He expressed commitment to primarily investing in “mostly American equities.”

Diversifying into international markets can be valuable, but historically, U.S. stocks have outperformed many foreign counterparts. The U.S. has been a leader in growth and innovation, and Buffett remains steadfast in his belief in American investments.

While market downturns can be tough emotionally, they also provide chances to acquire high-quality stocks at reduced prices. History shows that U.S. stocks usually rebound from crises, often reaching new highs.

Buffett’s long-term strategy has withstood various economic challenges, including the oil embargo, stagflation, Black Monday, the dot-com bubble, 9/11, the financial crisis, and the COVID-19 pandemic, consistently succeeding with a straightforward approach.

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Jeremy Bowman holds positions in Nvidia and Shopify. The Motley Fool has positions in and recommends Apple, Berkshire Hathaway, Nvidia, Shopify, Tesla, and The New York Times Co. The Motley Fool maintains a disclosure policy.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.