Many of the largest banks in the U.S. are getting hammered today, as economic concerns over President Donald Trump's tariffs and economic growth continue to impact the broader market.

Shares of JPMorgan Chase (JPM -5.16%), the largest bank in the U.S. by assets, traded nearly 5% lower as of 10:52 a.m. ET. Shares of Wells Fargo (WFC -6.97%) traded 6.5% lower at that time, while shares of Citigroup (C -8.20%) were down 7.5%.

First-quarter GDP estimates crater

By now, investors know that market conditions under Trump can change at lightning speed. Weakening consumer sentiment and a ratcheted-up trade war in recent weeks have resulted in a marketwide sell-off that has only accelerated.

The latest sign of weak economic growth came from the Federal Reserve Bank of Atlanta. Yesterday, the bank's GDPNow model projected first-quarter gross domestic product (GDP) to decline 2.8%. A week ago, GDPNow called for 2.3% growth, and a month ago, the model projected 4% growth. These are some of the fastest downward revisions since the pandemic.

One of the culprits behind the big move could be the Trump administration's tariffs, which have gone from a negotiating tactic into a full-blown trade war. Twenty-five percent tariffs on Mexico and Canada went into effect today, along with increased tariffs on goods from China. Retaliatory tariffs are expected to follow.

Tariffs serve as a tax on foreign imports and are meant to make American businesses more competitive. However, they may also lead to higher consumer prices and can harm economic growth. The Brookings Institute last month estimated that the 25% tariffs on Canada and Mexico, as well as retaliatory tariffs by each country, could lower real GDP growth by $75 billion in the U.S. Banks are cyclical, so they tend to be impacted by the economy and consumer sentiment, which makes up over two-thirds of GDP.

In company-specific news, more reports are emerging about manual errors on bank transfers made at Citigroup, a core part of regulatory issues the bank has been dealing with in recent years. Last Friday, The Financial Times reported that Citigroup accidentally sent a client an $81 trillion payment by accident when it intended to only send $280. The incident happened last April and the payment was eventually reversed. Yesterday, Bloomberg reported that Citigroup's wealth management division almost transferred $6 billion to a client's account.

The reports are concerning because regulators slapped Citigroup with a consent order in 2020, along with a $400 million fine for the bank's failure to correct long-standing internal and risk controls. The order is believed to have been at least partially triggered by Citigroup accidentally wiring $900 million to creditors of the company Revlon in 2020. Last July, regulators once again hit Citigroup with a $136 million fine for taking too long to fix matters related to the 2020 consent order.

Uncertainty at an all-time high

Heading into the year, I really liked the setup for bank stocks due to deregulation and a steepening yield curve in which shorter-duration Treasury notes yield less than longer-dated ones. However, banks are certainly not immune to a recession and large banks had been on a nice run. I'm still optimistic long term on the outlook for bank stocks, but there may be more opportunity right now in the small- and mid-cap space where merger and acquisition activity could heat up later this year.