Investing.com -- The S&P 500 is facing a risk of a deeper pullback following the announcement of reciprocal tariffs by U.S. president Donald Trump, according to RBC Capital Markets.

The investment banking firm warns that a breakdown below the mid-March low could open the door for the index to retreat into the 4,900-5,300 range—a potential 14-20% drawdown from the February peak.

Lori Calvasina, RBC’s head of U.S. equity strategy research, said the tariffs unveiled Wednesday evening surprised to the downside, particularly in terms of their breadth and magnitude.

While early headlines suggested a limited 10% baseline, markets reversed course as it became clear that higher levels would apply to a broader set of countries, including China, the EU, and Vietnam.

Futures briefly recovered but later began to flatten out, with small-cap futures showing the sharpest drops. This suggests that investors “were focusing on downside pressures to the U.S. economic growth backdrop,” Calvasina said.

As of 03:49 ET, the S&P 500 and Nasdaq 100 futures were down more than 3% each, while Russell 2000 futures sank 4.1%.

On a more positive note, Calvasina also pointed out some constructive elements in the tariff rollout.

Specifically, no new measures were imposed on Mexico and Canada, and a brief window for negotiation remains before the higher tariff levels take effect on April 9.

The announcement also gives U.S. public companies “some parameters to use when assessing the potential impact” on earnings—an important step in enabling analysts to start quantifying effects and updating earnings per share (EPS) forecasts.

This “will give investors confidence to assess valuations and make decisions about when opportunity has been unlocked in certain corners of the U.S. equity market,” Calvasina noted.

Still, the concerns outweigh the positives for now. The strategist pointed to a “lack of carve outs,” persistent uncertainty around final tariff levels, and the potential drag on consumer and corporate sentiment. The absence of a supportive policy response was also highlighted.

Treasury Secretary Bessent’s remark that he had “learned not to watch what is going on in after-hours market” was seen as a signal that the administration is willing to tolerate market volatility in pursuit of its broader goals.

Overall, for now, the risk of a deeper “growth scare” correction, similar to prior episodes in 2010, 2011, 2015-2016, and 2018, remains in focus.

Should the S&P 500 pull back to the predicted 4,900-5,300 range, it would make RBC’s bear case year-end target of 5,500 more likely than the current base case price target of 6,200, Calvasina said.