The Russell 2000 (RTY) sank into a bear market Thursday, the first key gauge of U.S. stocks to drop at least 20% from its most-recent closing high, with the Trump administration’s plan for global import tariffs triggering a mauling in the equity market.  

The Russell 2000 (RTY) dropped 5% Thursday afternoon. It punched an intraday low of 1,909.70, marking a 21% drop from its closing high of 2,426.56 in early December. The large-cap S&P 500 Index (SP500) fell into correction territory after U.S. President Donald Trump late Wednesday outlined a raft of reciprocal tariffs that will be put on products coming into the U.S. from countries worldwide. 

“The tariff announcements “is a significant negative for the U.S. economy and equities,” Eric Johnston, chief equity and macro strategist at Cantor Fitzgerald, said in a Thursday note. The “10% across-the-board tariff appears to not be negotiable and will be in place for long term and will start April 5,” he said. 

Small-cap stocks rallied after the November election of Trump and the Republican Party back into power in Washington. Investors broadly looked to potential tax cuts and looser regulatory rules to further bolster U.S. economic growth. But recession fears have cropped up with the administration’s ambition to slap levies on trading partners to remedy what it says are problems with trade imbalances and national security, among other issues.

“Recession odds have gone up significantly. We believe [odds] are certainly north of 50%,” and when recessions occur, “earnings almost always go down year over year,” Johnston said. 

The $63.6B iShares Russell 2000 ETF (NYSEARCA:IWM) dropped more than 5% during Thursday’s session. Below are how its 10-largest holdings were moving through midday Thursday: 

• Sprouts (SFM): -3.3%
• Insmed (INSM): down less than -0.1%
• FTAI Aviation (FTAI): -12.7%
• SouthState (SSB): -9.3%
• Applied Industrial Technologies (AIT): -8.5%
• Carpenter Tech (CRS): -9.7%
• Mueller Industries (MLI): -6.1%
• Mr. Cooper Group (COOP): -3.6%
• Halozyme (HALO): -2.1%
• Beacon Roofing (BECN): -0.1%

Other small-cap exchange-traded funds such as the Vanguard Small Cap ETF (VB) and the Dimensional U.S. Small Cap ETF (NYSEARCA:DFAS) were thrown lower as well on Thursday. 

Dear readers: We recognize that politics often intersects with the financial news of the day, so we invite you to click here to join the separate political discussion.