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US markets suffered their steepest decline since 2020 after China retaliated against Trump's tariffs. The S&P 500 fell 6%, fuelling recession fears and intensifying investor anxiety across global markets.
Global stock markets also continued their downward spiral.(Photo: AP)
UPDATED: Apr 5, 2025 02:43 IST
It's a bloodbath in the US markets. Wall Street was rocked on Friday, facing its sharpest downturn since the peak of the Covid-19 crisis. The S&P 500 plummeted by 6% after China retaliated against President Donald Trump’s tariff escalation, intensifying fears of a trade war spiraling into a global recession. Even a surprisingly strong US jobs report failed to reassure rattled investors.
The S&P 500's sharp decline marked the worst week for the index since March 2020, when the pandemic delivered a severe blow to the economy. The Dow Jones Industrial Average plummeted 2,231 points, or 5.5%, while the Nasdaq composite sank 5.8%, sliding more than 20% below its December record high.
Global Markets Slide Amid Trade War Fears
Global stock markets also continued their downward spiral, driven by growing investor fears that Trump’s reciprocal tariff strategy could fuel inflation and potentially tip the global economy into a recession. The uncertainty has amplified concerns across financial markets worldwide.
However, The US government urged investors to stick behind Trump’s policies. “To anyone on Wall Street this morning, I would say trust in President Trump,” press secretary Karoline Leavitt said in an interview on CNN. “This is a president who is doubling down on his proven economic formula from his first term this is indeed a national emergency and it’s about time we have a president who actually does something about it.”
No Winners as Stocks Plunge Across the Board
Stocks for all but 12 of the 500 companies that make up the S&P 500 index fell on Friday. The price of crude oil tumbled to its lowest level since 2021. Other basic building blocks for economic growth, such as copper, also saw prices slide on worries the trade war will weaken the global economy.
China Hits Back with Matching Tariffs
China’s response to US tariffs caused an immediate acceleration of losses in markets worldwide. The Commerce Ministry in Beijing said it would respond to the 34% tariffs imposed by the US on imports from China with its own 34% tariff on imports of all US products beginning April 10. The United States and China are the world’s two largest economies.
Trump Remains Defiant
Trump seemed unfazed. From Mar-a-Lago, his private club in Florida, Trump headed to his golf course a few miles away after writing on social media that “THIS IS A GREAT TIME TO GET RICH.”
However, Trump gave mixed signals on Friday. Trump said Vietnam “wants to cut their Tariffs down to ZERO if they are able to make an agreement with the US.” Trump also criticised China’s retaliation, saying on his Truth Social platform that “CHINA PLAYED IT WRONG, THEY PANICKED - THE ONE THING THEY CANNOT AFFORD TO DO!”
Trump has said Americans may feel “some pain” because of tariffs, but he has also said the long-term goals, including getting more manufacturing jobs back to the United States, are worth it.
Fed in Tight Spot Over Interest Rates
The Federal Reserve could cushion the blow of tariffs on the economy by cutting interest rates, which can encourage companies and households to borrow and spend. But the Fed may have less freedom to move than it would like.
Fed Chair Jerome Powell said Friday that tariffs could also drive up expectations for inflation. That could prove more damaging than high inflation itself, because it can drive a vicious cycle of behaviour that only worsens inflation. “Our obligation is to keep longer-term inflation expectations well anchored and to make certain that a one-time increase in the price level does not become an ongoing inflation problem,” Powell said.
Uncertainty Ahead for Tariff Timeline
Much will depend on how long Trump’s tariffs stick and what kind of retaliations other countries deliver. Some of Wall Street is holding onto hope that Trump will lower the tariffs after prying out some “wins” from other countries following negotiations.
Trump has given mixed signals on that. On Friday, he said an official from Vietnam said his country already “wants to cut their tariffs down to ZERO if they are able to make an agreement with the U.S.” Trump also criticised China’s retaliation, saying on his Truth Social platform that “CHINA PLAYED IT WRONG, THEY PANICKED - THE ONE THING THEY CANNOT AFFORD TO DO!”
Trump has said Americans may feel “some pain” because of tariffs, but he has also said the long-term goals, including getting more manufacturing jobs back to the United States, are worth it. On Thursday, he likened the situation to a medical operation, where the U.S. economy is the patient.
“For investors looking at their portfolios, it could have felt like an operation performed without anaesthesia,” said Brian Jacobsen, chief economist at Annex Wealth Management. But Jacobsen also said the next surprise for investors could be how quickly tariffs get negotiated down. “The speed of recovery will depend on how, and how quickly, officials negotiate,” he said.
(WIth inputs from AP)
Published By:
Satyam Singh
Published On:
Apr 5, 2025
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