Why iShares Russell 2000 ETF (IWM) Is Down 6% Today

The iShares Russell 2000 ETF (IWM) , which tracks small-cap stocks, plunged 6.5% on Thursday as President Donald Trump's sweeping reciprocal tariffs roiled financial markets and heightened concerns about an economic downturn.

Trump on Wednesday declared a national emergency to impose reciprocal tariffs, citing a persistent trade deficit. A White House fact sheet detailed affected imports, emphasizing fair treatment in global trade.

What To Know: The Russell 2000 index, which IWM mirrors, is particularly sensitive to domestic economic conditions, and investors may fear that higher tariffs could squeeze profit margins for smaller companies, many of which lack the pricing power of larger multinational firms.

With financials making up the largest sector allocation in IWM at 25.25%, concerns over a slowing economy and potential credit stress have weighed heavily on regional banks and smaller financial institutions.

Higher tariffs could also hurt the industrial sector, which accounts for 17.73% of IWM's holdings, by increasing raw material costs and disrupting supply chains.

Similarly, the healthcare sector, at 13.16% of the ETF's allocation, faces uncertainty as trade tensions could impact medical supply costs and pharmaceutical pricing.

Consumer services (7.67%) and consumer goods (5.48%) stocks within IWM could also take a hit as rising costs from tariffs may lead to weaker consumer demand. Meanwhile, technology stocks, which make up 7.01% of the ETF, are at risk if supply chain disruptions escalate, particularly in semiconductor and hardware manufacturing.

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