The U.S. stock market was reaching new highs on a regular basis through the spring and summer months before a Truth Social post on Friday triggered the largest selloff in years. Hours after President Trump declared that he would impose an additional 100% tariff on Chinese produces entering the U.S., the S&P 500 lost 2.7% of its value, costing investors roughly $2 trillion. People who held cryptocurrencies lost another $18.28 billion over the course of the day—including $5 billion of bitcoin, $4 billion of ether and $2 billion of solana.
The tariff threat came as China set restrictions on exporting rare earth materials used in electric vehicle batteries and green energy technology. Many insiders viewed it as an opening gambit to negotiating China into a less restrictive policy. Lay investors saw disaster, and sold their stock positions. The markets are recovering as President Trump is now signaling that he is willing to negotiate, and that Chinese leader Xi is a friend of his.
There are so many lessons to this story that it’s hard to know where to begin. The first, perhaps, is that many pundits and not a few voters have been expecting the Trump Administration policies to destroy the economy and the markets. That clearly hasn’t happened, and it is likely that this rash negotiating tactic, and the panic selling, will ultimately be seen as a blip on the screen. However you feel about the recent government policies and initiatives, they generally aren’t directly connected to the actual business workings of the companies that make up the stock market. In those cases where a company does happen to be affected, it has a board of directors and experienced management capable of navigating the choppy waters.
A second lesson is that bull markets don’t last forever, so a correction is always possible—and these (usually) temporary declines are factored into a longer-term investment and retirement plan.
The third lesson, as the markets recover from the shock of the Truth Social announcement, is that it is never wise to react impulsively to the news cycle. It’s likely that people who participated in that 2.7% decline will be kicking themselves as the U.S. and China negotiate their way out of the extreme positions, and the markets recover.
Does that mean the markets will continue testing new highs? Who knows? Even after the one-day meltdown, stocks were not cheap. The investing public could suddenly decide that stocks are too expensive for their taste—or they could resume their previous exuberance for days, weeks, months or years.
Meanwhile, millions of Americans go to work each day and spend their time incrementally increasing the value of the enterprises they work for, hour by hour, day by day—and THAT’S what makes investing worthwhile.
Everything else is just noise.
WHY IS THE GOVERNMENT SHUT DOWN?
The U.S. government shutdown can be largely be explained by a political argument over the enhanced premium tax credits—Democrats want them, Republicans say that they want to talk it over after the funding bill has been passed.
But what the heck ARE the premium tax credits? And why is it so important to both sides that they would risk an unpopular shutdown over it?
The enhanced premium tax credits were/are increased health insurance subsidies passed during the COVID-19 pandemic. The measure expanded eligibility for the subsidies to include families whose income was up to four times the federal poverty level. Today, individuals earning $62,600 or families of four earning $124,800 a year will qualify for help to reduce their costs of buying health insurance. As a result, the number of people purchasing insurance through the marketplace has more than doubled since 2020. About 92% of the 24.3 million Americans who use the marketplace receive a subsidy of some amount.
But the real issue is how these subsidies affect the price of health insurance. If the subsidies go away, many healthy Americans are expected to drop the unaffordable coverage. This would leave the insurers with a lot of people who have large medical expenses who will hang onto coverage because it’s cheaper than paying out of pocket. The result: less money coming in, roughly the same money going out, which means that if the subsidies go away, the insurance companies will raise their rates. This would further drive out healthy policyholders who might have been able to afford their previous coverage without the subsidies.
By some estimates, if the credits expire at the end of 2025, out-of-pocket premiums would rise by more than 75% on average. The Kaiser Family Foundation has created a calculator which people can use to estimate how their costs could change in their zip code based on income and family size.
The other problem is that people have to make their marketplace decisions starting November 1. This means even if the stalemate ends and some kind of deal is worked out, it might not give the insurance companies enough time to respond with accurate pricing.
This is a long way of saying that the issue that has triggered the current shutdown is actually kind of a big deal for a lot of Americans. Was it worth shutting down the government? That’s for the voters to decide.
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Sources:
- https://www.yahoo.com/finance/news/trump-bet-china-face-tremendous-104848730.html
- https://www.cnn.com/2025/10/11/business/trump-tariffs-crypto-selloff
- https://www.cnn.com/2025/10/12/business/china-warns-us-of-counter-actions-if-trump-doesnt-walk-back-his-100-tariff-threat
- https://www.cnn.com/2025/10/10/politics/rare-earths-china-trump-threats
- https://www.cnbc.com/2025/10/11/trump-post-costs-stocks-2-trillion-in-single-day.html
- https://www.yahoo.com/news/articles/democrats-want-health-care-tax-090320535.html
- https://www.kff.org/interactive/how-much-more-would-people-pay-in-premiums-if-the-acas-enhanced-subsidies-expired/
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