Updated: Stocks Sink as Trump Tariffs Spark Recession Fears

Yesterday at 3:37 pm

2624 posts

Updated: Stocks Sink as Trump Tariffs Spark Recession Fears \ Newslooks \ Washington DC \ Mary Sidiqi \ Evening Edition \ Financial markets nosedived Friday after China retaliated against President Trump’s tariffs with a 34% tariff of its own, deepening the global trade war. The S&P 500 fell 5.7%, while the Dow lost 2,034 points. Investors fear a global recession, even as U.S. jobs data showed strength.

Global Sell-Off Deepens as Trump’s Trade War Escalates Quick Looks

S&P 500 drops 5.7% in steepest decline since 2020
China hits back with 34% tariffs on all U.S. goods
Dow plunges 2,034 points; Nasdaq down 5.6%
Global stocks and commodities tumble; crude oil hits 2021 low
Trump says, “THIS IS A GREAT TIME TO GET RICH”
Fed Chair Powell warns tariffs could fuel long-term inflation
Recession fears grow as markets brace for prolonged conflict
GE Healthcare, DuPont see major losses amid China retaliation
Vietnam offers zero tariffs in potential U.S. trade deal
Treasury yields dip but rebound after inflation warning

Deep Look

Global financial markets reeled on Friday as fears of a deepening trade war between the world’s two largest economies—the United States and China—triggered the worst market rout since the onset of the COVID-19 pandemic. Stocks, commodities, and investor confidence all crumbled in the face of China’s aggressive response to President Donald Trump’s latest tariff escalation, fueling concerns of a looming global recession.

The S&P 500 fell 5.7%, while the Dow Jones Industrial Average plunged 2,034 points, or 5%, in a stunning sell-off that wiped out weeks of gains in a single trading session. The Nasdaq Composite also tanked, down 5.6% with an hour left before markets closed.

Investors initially found a brief glimmer of optimism in the March jobs report, which revealed that U.S. employers added more jobs than expected. However, the data, viewed as backward-looking, did little to soothe anxiety over the broader implications of the U.S.-China trade standoff.

China Responds in Kind

The panic across markets was triggered by Beijing’s announcement Friday morning that it would match the U.S.’s newly imposed 34% tariff on Chinese imports with an equivalent 34% tariff on all U.S. goods, effective April 10. The move marks the most sweeping retaliatory strike yet in the rapidly escalating trade conflict.

“CHINA PLAYED IT WRONG, THEY PANICKED,” Trump posted on Truth Social in response, adding, “THE ONE THING THEY CANNOT AFFORD TO DO!”

The tariffs were announced just days after President Trump introduced the steepest round of import taxes in U.S. history, part of his “economic surgery” plan to revive American manufacturing. Trump, speaking from his Mar-a-Lago estate, appeared undeterred by the market carnage.

“THIS IS A GREAT TIME TO GET RICH,” he wrote on social media before heading to one of his Florida golf courses.

Markets Rattle Worldwide

The fallout wasn’t limited to Wall Street. European and Asian stock markets followed suit:

Germany’s DAX dropped 5%
France’s CAC 40 fell 4.3%
Japan’s Nikkei 225 declined 2.8%

Meanwhile, oil prices tumbled to their lowest levels since 2021, and prices for industrial metals like copper slumped on fears that the trade war will crush global demand.

Bond markets, traditionally seen as safe havens during times of volatility, also experienced sharp movements. The 10-year U.S. Treasury yield dropped to 4.00%, down from 4.06% Thursday and well below the 4.80% levels seen earlier this year. Yields briefly dipped as low as 3.90% before bouncing back after Federal Reserve Chair Jerome Powell signaled caution on cutting interest rates.

Fed Faces Inflation Tightrope

In a Friday press briefing, Powell warned that tariffs could not only disrupt supply chains but also raise long-term inflation expectations, making the Fed’s job harder.

“Our obligation is to keep longer-term inflation expectations well anchored,” Powell said. “We can’t let a one-time price shock become a lasting problem.”

This suggests the Fed may hesitate to cut interest rates, even as the economy teeters toward contraction. Rate cuts would typically help by encouraging borrowing and investment, but in the current inflation-sensitive climate, they could risk stoking further price surges.

Trump’s Tariff Strategy Faces Test

The White House insists that short-term economic pain is a necessary step toward long-term gains. Trump has framed the trade war as a battle for national economic sovereignty, claiming it will restore American manufacturing jobs and push foreign countries into more favorable trade agreements.

“Sometimes the cure hurts,” Trump said earlier this week, likening the economy to a patient undergoing major surgery. “But the result will be a STRONGER, MORE INDEPENDENT AMERICA.”

Critics argue that the strategy is backfiring. The escalating tariffs are raising costs for businesses and consumers, and retaliation from other countries could devastate U.S. exports.

Major Companies Hit Hard

The brunt of the backlash is being felt by American companies with heavy exposure to China:

GE Healthcare, which earned 12% of its revenue from China in 2024, lost 14% in Friday’s trading.
DuPont dropped 12% after China launched an antitrust investigation into its Chinese subsidiary—part of a growing list of retaliatory measures targeting U.S. firms.

Other sectors tied to international trade and industrial production also fell sharply as fears of supply chain disruption and global slowdown spread.

What Comes Next?

Markets will remain volatile as investors weigh how long tariffs will last and whether a diplomatic breakthrough is on the horizon. Trump hinted Friday that other countries may be seeking deals, citing a conversation with a Vietnamese official who suggested Vietnam is ready to cut tariffs to zero in exchange for a bilateral agreement.

While some analysts believe Trump could back down after claiming a few wins, others fear this may just be the beginning of a prolonged economic standoff.

“If tariffs stick around, and retaliation intensifies, a recession seems inevitable,” said Rick Rieder, BlackRock’s chief investment officer of global fixed income. “The world has changed, and the economic conditions have changed.”

For now, uncertainty reigns. The S&P 500 is already down 17% from its record high in February. If conditions worsen, deeper losses could lie ahead.

As Brian Jacobsen, chief economist at Annex Wealth Management, put it:

“For investors, it feels like an operation performed without anesthesia. But the next surprise could be how quickly the global economy recovers—if the politics allow for it.”