Global stock markets plunged further on Friday after China announced fresh retaliatory tariffs of 34 percent on American imports, targeting US President Donald Trump’s aggressive trade policies and amplifying fears of a looming global recession.
The deepening trade conflict has triggered the sharpest market drop since the COVID-19 pandemic.
The Nasdaq Composite confirmed it had entered a bear market, falling sharply from its Dec 16 peak of 20,173.89. Similarly, the Dow Jones Industrial Average entered correction territory, sliding from its record high of 45,014.04 set on Dec 4.
Adding to the escalating tensions, China unveiled restrictions on rare earth exports and blacklisted 11 American entities under its “unreliable entity” policy, primarily targeting firms linked to arms deals with Taiwan, which Beijing considers part of its territory. President Trump remained defiant, insisting on continuing his hardline stance.
Canada and other affected nations are also gearing up for countermeasures, as Trump’s tariff hikes have pushed US trade barriers to levels not seen in over a century, sparking a sharp global market sell-off.
By the week’s end, the S&P 500 dropped 9.08 percent, the Nasdaq tumbled 10.02 percent, the Dow fell 7.86 percent, and the Russell 2000 Small Cap Index slipped 9.70 percent.
JP Morgan has now placed the chances of a global recession by year-end at 60 percent, up from 40 percent, citing mounting trade tensions.
“This situation is serious and far from over, which explains the sharp market reaction,” said Stephane Ekolo, Market & Equity Strategist at Tradition in London. “Investors fear a prolonged tit-for-tat scenario.”
Republican Senator Ted Cruz, a staunch Trump ally, raised concerns on his podcast, warning that the tariffs could heavily impact the US economy and Republican electoral prospects.
“These tariffs amount to trillions in extra taxes for American consumers,” Cruz said. While he supports using tariffs as leverage for global trade reform, he cautioned that a drawn-out trade war would be disastrous.
Despite his concerns, Cruz voted with Trump earlier in the week when the Senate passed a measure to roll back tariffs on Canada—Cruz was among the minority who opposed it.
As the markets reeled, Trump was mostly out of sight at his Florida golf course, releasing a series of posts on social media asserting that the US economy would triumph. He returned to Mar-a-Lago in the afternoon and was not expected to make public statements.
Federal Reserve Chair Jerome Powell, speaking at a business journalism event, acknowledged that the unexpected tariffs could lead to higher inflation and slower economic growth. While the Fed would wait for more data before deciding on policy changes, Powell emphasized the importance of keeping inflation expectations stable if pricing pressures persist.
Powell didn’t comment directly on the stock market collapse but noted that the uncertainty had stalled business activity.
“People are just waiting for clarity,” Powell said. “I don’t know when it’ll come, but eventually, it will.”
Shortly before Powell’s speech, Trump took to Truth Social urging the Fed to slash interest rates, writing: “CUT INTEREST RATES, JEROME, AND STOP PLAYING POLITICS!”
Global Fallout
Trump’s administration defended the market drop as a temporary correction, claiming it would lead to long-term benefits.
Treasury Secretary Scott Bessent, in an interview with Tucker Carlson released Friday, attributed the market volatility more to China’s surprise launch of its DeepSeek AI tool than to Trump’s tariffs.
The White House also pointed to unexpectedly strong job data, as the US Labor Department reported a substantial rise in employment for March. However, many economists warn that the tariff-driven uncertainty could soon affect hiring and growth.
In a defiant post, Trump stated: “To the many investors coming into the United States and investing massive amounts of money, my policies will never change. This is a great time to get rich, richer than ever before!!!”
Following China’s tariff announcement, Trump added, “China played it wrong, they panicked—the one thing they cannot afford to do!”
The US has set a 10 percent tariff on a wide array of imports beginning Saturday, though shipments already en route can enter without penalty until May 27, per US Customs and Border Protection.
Trump also announced a 75-day extension on ByteDance’s deadline to divest from TikTok or face a ban in the US.
In contrast, Canada’s labor market showed signs of strain in March, posting its first job loss since 2022. Employers cited tariff uncertainty as a key reason for hiring freezes and layoffs.
Japanese Prime Minister Shigeru Ishiba called the tariff fallout a “national crisis,” as banking shares tumbled and Tokyo’s markets headed for their worst week in years.
Divided Europe, Mixed Messaging
As European stocks endured their steepest weekly losses in years, EU Trade Commissioner Maros Sefcovic said he had a “frank” two-hour conversation with US officials Howard Lutnick and Jamieson Greer.
“I was clear: US tariffs are damaging and unjustified,” Sefcovic posted on social media. “The EU remains open to meaningful dialogue but is ready to protect our interests.”
European leaders remain split on how to respond. Ireland, Italy, Poland, and the Scandinavian nations advocate caution, while French President Emmanuel Macron has urged companies to halt investment in the US.
French Finance Minister Eric Lombard later warned that retaliatory tariffs could backfire on European consumers.
US consumers are already bracing for price hikes. Tariffs could impact a wide range of products, including cannabis, sneakers, and iPhones. An iPhone could hit nearly $2,300 if Apple passes the additional costs to buyers, according to projections from Rosenblatt Securities.
Trump insists the “reciprocal” tariffs are a response to foreign trade barriers and says they will eventually bring jobs back and open new markets, although administration officials admit it will take time for the benefits to materialize.
