The global tariff rout deepened Friday, with the Nasdaq dropping as much as 5% after China’s decision to match U.S. duties escalated the worst trade war in decades.
China’s decision to apply 34% levies on all imported goods from the U.S. next Thursday, after President Trump’s tariffs go into effect, rattled markets in part because it further deflated hopes on Wall Street that a global settlement could be reached soon.
Now investors are bracing for further conflict—none of which is likely to improve the outlook for the global economy or corporate profits, the strongest driver of stock prices. JPMorgan analysts on Thursday boosted their odds on a global recession to 60%.
The torrent of selling late this week shows investors coming to grips with the grim implications of the largest tariff increase in nearly a century. The levies announced late Wednesday were deeper and more aggressive than the business world expected. Even as Trump left the door open to making deals, he vowed new tariffs on drugs and microchips. Investors took little comfort from Trump’s stated willingness to negotiate.
Marco Rubio, the secretary of state, acknowledged that “markets are crashing” but said economies weren’t, and that global businesses would adjust to the new environment.
Investors drew little solace from an unexpectedly strong jobs report. That showed the economy added 228,000 jobs last month, giving little sign that uncertainty ahead of the tariff rollout had derailed the labor market.
On Friday, major U.S. indexes opened sharply lower before staging a modest recovery late in the morning after Trump went to social media to say Vietnam’s leader wants to cut its tariffs to zero. The Dow soon returned to moving lower, however, falling 1600 points on the day. The Nasdaq Composite was down 4.9% and on pace to close in a bear market, meaning it has fallen more than 20% from a recent peak. Overseas markets took fresh hits, with European stocks tumbling more than 4%.
Traders have ramped up bets on interest-rate cuts this year, figuring the Federal Reserve will have to shore up the economy. Oil prices slid further, with benchmark U.S. crude falling to about $62 a barrel, the lowest level since 2021 if they settle there.
Investors rushed into Treasurys, pushing 10-year yields well below 4%. Bonds in other big economies, like Japan, Germany and the U.K., also rallied. Bond yields fall as prices rise. The dollar, which fell sharply Thursday, rebounded somewhat but remains near its weakest levels of the year.
A speech on the economic outlook by Fed Chair Jerome Powell started at about 11:25 a.m ET. The big question: How will tariffs and the market mayhem feed into future rate decisions?
