NEW YORK — The global sell-off in financial markets surged into an alarming new phase on Friday, as escalating tensions in the U.S.-China trade war triggered Wall Street's sharpest decline since the early days of the COVID-19 crisis.
The S&P 500 tumbled 5.7%, marking one of its worst single-day drops in years. Meanwhile, the Dow Jones Industrial Average plunged by a staggering 2,054 points, erasing trillions of dollars in market value. The Nasdaq Composite fell 5.5%, dragged down by tech stocks that had once been among the strongest performers during the post-pandemic recovery.
With just over an hour of trading left on Friday, markets showed few signs of stabilizing, as a wave of panic swept across trading floors and investor platforms. The downward spiral was sparked by China’s aggressive response to the U.S. tariffs, which intensified fears that the trade war between the world’s two largest economies is spinning out of control.
In a tit-for-tat move, Beijing announced a 34% tariff on all U.S. imports, matching the rate imposed earlier by the Trump administration. The Chinese Commerce Ministry declared that the new duties would take effect on April 10, escalating the economic standoff and sending shockwaves across global markets.
The tariffs, which now affect nearly all cross-border trade between the U.S. and China, have raised alarm bells about a possible global recession. Investors fear that prolonged tensions could disrupt supply chains, increase input costs, and suppress consumer demand across major economies.
The turmoil spread far beyond Wall Street. European markets were hit hard, with Germany’s DAX down 5%, France’s CAC 40 losing 4.3%, and London’s FTSE 100 sliding 3.8%. In Asia, Japan’s Nikkei 225 shed 2.8%, as selling pressure mounted across continents. In commodities markets, the price of crude oil fell to its lowest since 2021, while copper, a bellwether for global economic activity, also dropped sharply.
Even traditionally safe assets offered little refuge. U.S. Treasury yields, which typically fall as investors seek safer investments, plunged. The yield on the 10-year Treasury dropped to 3.99%, down from 4.06% the previous day and significantly lower than the 4.80% seen earlier this year—a dramatic move that reflects both fear and uncertainty about economic prospects.
For a brief moment, the bleeding in markets slowed after the release of the U.S. jobs report, which showed stronger-than-expected hiring in March. Employers added more jobs than economists had forecast, indicating continued resilience in the labor market. The unemployment rate held steady at 3.8%, and wage growth remained modest.
But the optimism was short-lived. Analysts quickly pointed out that the jobs report is backward-looking, while the fear gripping markets is all about what lies ahead. "The world has changed, and the economic conditions have changed," said Rick Rieder, BlackRock’s chief investment officer of global fixed income. "Markets are adjusting to a new reality where trade disruptions could be the norm."
The central question dominating trading desks and policy meetings alike is: Will the trade war push the global economy into a recession? The S&P 500 is already down around 16% from its February high, and some analysts warn the worst may still be ahead if geopolitical tensions aren’t resolved quickly.
President Donald Trump, however, appeared unbothered by the unfolding crisis. From Mar-a-Lago, he posted on Truth Social that “THIS IS A GREAT TIME TO GET RICH,” before heading to his nearby golf course. Trump has repeatedly argued that tariffs are a tool to restore balance to U.S. trade relations and revitalize domestic manufacturing—even if they inflict short-term economic pain.
On Thursday, the president likened the situation to undergoing surgery, saying the U.S. economy is the patient undergoing treatment. “There may be pain,” he said, “but it’s necessary for long-term health.” Critics argue that the analogy downplays the real damage being felt by investors, businesses, and workers alike.
“For investors looking at their portfolios, it could have felt like an operation performed without anesthesia,” remarked Brian Jacobsen, chief economist at Annex Wealth Management. Still, he offered a sliver of hope, noting that tariffs could be negotiated down just as quickly as they were imposed—if diplomacy gains traction.
Indeed, some signs of diplomatic movement emerged. Vietnam announced that its deputy prime minister would travel to Washington to discuss trade relations, while the European Commission reiterated its intent to respond but left the door open for negotiations. Still, most observers agree that it remains uncertain whether the Trump administration is aiming for a quick resolution—or doubling down on long-term confrontation.
Trump, meanwhile, lashed out at China’s retaliation, writing that “CHINA PLAYED IT WRONG, THEY PANICKED – THE ONE THING THEY CANNOT AFFORD TO DO!” His combative tone suggests the administration is unlikely to de-escalate without extracting major concessions.
Among the hardest hit were U.S. companies with major exposure to China. DuPont shares plunged 11.7% after Chinese regulators launched an anti-trust investigation into one of its subsidiaries. GE Healthcare, which derived 13.8% of its revenue last year from China, fell 12.7% on fears of regulatory pressure and declining sales.
The worsening trade dispute also complicates the Federal Reserve’s next move. While many expected the Fed to consider cutting interest rates to cushion the economy, policymakers now face a thorny dilemma. Fed Chair Jerome Powell, speaking in Arlington, Virginia, warned that tariffs could fuel not just inflation—but inflation expectations, which are far more difficult to reverse once entrenched.
“Our obligation is to keep longer-term inflation expectations well anchored,” Powell said, adding that a one-time price surge caused by tariffs must not morph into a persistent problem. That could mean the Fed may hesitate to slash rates even as markets beg for relief.
Households are already feeling the squeeze. Many Americans are bracing for higher prices on everything from electronics to groceries, just as their retirement savings are taking a hit from plummeting stock values.
As the week closes, uncertainty reigns. Investors, policymakers, and ordinary consumers alike are now grappling with a transformed economic landscape—one marked by confrontation, volatility, and the very real risk of global slowdown.
Unless talks resume swiftly and progress is made, the weeks ahead could bring even more turbulence—for Wall Street and beyond.
