Global equities extended their sharp decline on Friday after China unveiled a new wave of retaliatory tariffs against the United States, deepening concerns over a full-blown trade war and its economic repercussions.
Beijing announced a 34% tariff on a wide range of American goods, prompting another market selloff that capped one of the worst weeks for financial markets since the pandemic. Major indexes confirmed milestone losses, with the tech-heavy Nasdaq Composite entering a bear market, and the Dow Jones Industrial Average sliding into correction territory.
Adding to the market turbulence, China introduced export controls on key rare earth materials and expanded its so-called “unreliable entities” list to include several U.S. firms, some of which are involved in arms sales to Taiwan — a move seen as a pointed political signal amid heightened geopolitical tensions.
President Donald Trump, for his part, stood firm on trade policy, signaling no intention of reversing course. The White House downplayed the financial fallout, while Trump himself remained largely out of public view, issuing defiant messages from his Florida estate, calling this “a great time to invest” and reiterating his belief that the U.S. will “win” the trade confrontation.
For the week, U.S. equity benchmarks suffered substantial losses: the S&P 500 dropped more than 9%, the Nasdaq declined over 10%, and the Dow Jones slid nearly 8%. The Russell 2000 index of smaller companies fell nearly 10%, underscoring the breadth of investor concern.
In response to the deepening standoff, economists at J.P. Morgan raised the probability of a global recession to 60%, citing elevated uncertainty, weakened business sentiment, and the prospect of slowing trade.
“This kind of back-and-forth trade policy leads to a risk-off environment,” said Stephane Ekolo, a market strategist in London. “Investors are bracing for the possibility of sustained economic disruption.”
Notably, dissent over the tariffs emerged within Republican ranks. Senator Ted Cruz warned the measures could inflict significant economic damage and prove politically costly. While he expressed hope that tariffs might ultimately secure better trade terms, he cautioned against a prolonged standoff, calling it a “terrible outcome.”
Cruz, however, continued to back Trump legislatively, voting against a recent Senate measure that would have blocked tariffs on Canadian imports.
At the Federal Reserve, Chair Jerome Powell acknowledged the impact of the trade escalation during remarks to business journalists, saying the size of the new tariffs was “larger than expected” and could increase inflationary pressures while dampening growth. He emphasized the Fed would remain data-dependent but reaffirmed a focus on maintaining inflation expectations.
Meanwhile, markets in other regions also faltered. In Canada, employment data showed the first net job loss since 2022, with rising uncertainty causing companies to delay hiring decisions. In Japan, Prime Minister Shigeru Ishiba labeled the situation a “national crisis,” as financial stocks plunged, driving Tokyo’s market toward its worst performance in years.
European officials expressed frustration over the U.S. trade stance. EU Trade Commissioner Maros Sefcovic said he held an “honest” discussion with American officials, reiterating that the tariffs were harmful and unjustified. Internal divisions across the bloc, however, remain, with some nations urging caution while others push for immediate retaliatory action.
French President Emmanuel Macron urged businesses to halt new U.S. investments, while Finance Minister Eric Lombard warned against tit-for-tat tariffs, noting the risk of higher consumer costs in Europe.
As American tariffs take effect — with most imports facing a 10% surcharge starting Saturday — analysts say prices for everyday items could rise significantly. Some estimates suggest that luxury electronics like smartphones could surge to nearly $2,300 if companies pass on tariff-related costs to consumers.
Despite the sharp market drop, the U.S. labor market remained strong in March, with job growth exceeding expectations, according to government data released Friday. Still, some analysts warned that a sustained trade war could erode business confidence and eventually weigh on hiring.
While markets await further developments, the uncertainty shows little sign of abating.