My Yorkie unlearned everything.
 

I got Knox when he was 8 weeks old. I immediately started training him to go on paper and then switched to pads. He was peeing on the pads almost every single time, but he would never poop on them. Then one day, a week ago, when he was approximately eleven weeks old, as I was stepping out of the shower, he peed on the bathroom floor. I swatted his butt and said no. I took him to his pad. Since that day, he will not pee in front of me. He tries to find a place out of my sight to eliminate. He associates using the restroom with punishment. I gave him a complex by swatting his butt. For two weeks he had used the pad like clockwork but now he won't use it at all.

I have a crate, but it's probably too large. I couldn't stand the thought of him staying in a tiny one all day while I'm at work. Today, he didn't eliminate in his big crate, and I took him out every hour and a half after I got home. He went to pee three times, each time trying to hide when he did it, but the fourth time, he ran back in the house and squatted before I could catch him. I put him back outside, but he wouldn't finish. My dog hadn't made a mistake in a week before his setback and last night he peed in the house 8 times. Due to this I am confining him to his crate. Are all Yorkies as sensitive as Knox. All of his training was for naught due to one little mistake by me!

Don't panic. Your yorkie is still very young. 8 weeks is entirely too young to have him be away from momma and his littermates. but anyway, now he's home. You say he's only 12 weeks now, so you've only been training for a month. This is just the beginning. It takes time and patience. Most likely he does not even know this is now his forever home. Give him time. Most yorkies don't get it until about 6 mos.

Do you have an ex pen? If you don't want him in a crate all day, get an ex pen, have his bed, food, toys on one side, pad on the other. Most dogs will not want to sleep and play near where they go pee and poo.

I do agree with you, you shouldn't have swatted him on the butt. A stern no and a finger pointing to it, he will know. When you correct, use a firm tone of voice. When praising, use a very high friendly voice. They will understand.

ETA: btw welcome to YT!

If he's sensitive, maybe if you can manage being very close to him when he pees in a good place and a quiet happy yes yes nice good boy pat pat nice good pee yes might make up for it? Should throw him back into uncertainty at least, and then you can take it back up from there?

Maybe try to pretend like you are not looking so that he pees when you are around. And than act very excited for him and praise him, as well as give him his favorite treat. Do this few times so he gets an idea that peeing is good. It sounds like he is a very smart puppy and a very QUICK learner, so you shouldn't have too much trouble fixing the situation.

I've changed strategies entirely.
 

Since he was refusing to use the pee pads anymore, I've decided to wholeheartedly embrace the crate training method of housebreaking. He's doing pretty well so far. He hasn't soiled his crate once. I rush home at lunch from work and let him out. I take him out every two hours after I get home. I give him a treat if he goes outside and reward him with fifteen minutes of play outside the crate. If he doesn't go, I crate him back up and try again in fifteen minutes. He is very smart. He has an incredible memory. But...he is also very willful, even rebellious. Crating him is harder on me than it is on Knoxie.

Word of caution
esp with little pups when they are being trained for housetraining
Do Not swat them or raise your voice to correct them

As you saw it makes them fearful of you and they will tend to run and hide to eliminate
You don't want to find little dessicated turds behind furniture
in the future so its best to only use rewards for positive behavior