Josh Weiner
Wall Street reeled on Friday as the escalating U.S.-China trade conflict triggered the most severe financial market decline since the early days of the COVID-19 pandemic. The S&P 500 nosedived 6%, closing its worst week since March 2020, after China retaliated against President Donald Trump’s aggressive tariff hike with its own 34% levy on all U.S. imports, effective April 10.
The Dow Jones Industrial Average plunged 2,231 points (5.5%), while the Nasdaq Composite sank 5.8%, officially entering bear market territory after falling more than 20% from its December peak.
A Perfect Storm Hits Wall Street
China’s swift and sweeping countermeasures set off a wave of selling across global markets, eclipsing even the optimism sparked by a surprisingly strong U.S. jobs report. Though employers hired more than expected last month—bolstering confidence in the domestic labor market—the report couldn’t override investor anxiety about the path ahead.
“The world has changed, and so have the economic conditions,” warned Rick Rieder, Global Fixed Income CIO at BlackRock, reflecting on the shift in market psychology.
Nearly every sector was battered, with only 14 of the 500 S&P companies avoiding losses. Energy prices cratered, with crude oil hitting its lowest point since 2021, and industrial metals like copper also slid on fears that global growth is in jeopardy.
Trump Dismisses Turmoil, Hints at Strategic Patience
President Trump remained unmoved by the market chaos. From his Mar-a-Lago estate in Florida, he posted on Truth Social:
“THIS IS A GREAT TIME TO GET RICH,” signaling his belief that the volatility presents a buying opportunity.
While some on Wall Street hope the current hardline tactics are part of a broader negotiating strategy, uncertainty reigns. Trump’s mixed signals—suggesting Vietnam may cut tariffs to zero while mocking China for “panicking”—have made it difficult for investors to gauge the administration’s endgame.
“It’s like undergoing surgery without anesthesia,” said Brian Jacobsen, Chief Economist at Annex Wealth Management. “But the next shock could be a faster-than-expected recovery if tariffs are dialed back.”
Central Bank Caught in a Dilemma
The Federal Reserve now finds itself in a difficult position. While it could cut interest rates to cushion the economic blow, Fed Chair Jerome Powell raised a red flag on Friday, cautioning that the tariffs could fuel inflation expectations, creating long-term risks.
“We must ensure a one-time price jump doesn’t turn into an entrenched inflation spiral,” Powell said, hinting at limited room to maneuver without exacerbating inflation.
Global Sell-Off and Corporate Casualties
The economic tremors extended far beyond U.S. borders.
- Germany’s DAX sank 5%
- France’s CAC 40 dropped 4.3%
- Japan’s Nikkei 225 closed down 2.8%
In the U.S., companies with significant exposure to China bore the brunt of the damage.
- DuPont plunged 12.7% after Beijing launched an anti-trust investigation into its China operations.
- GE Healthcare, which generates 12% of its revenue from China, fell 16%.
Bond Yields Slip, Then Steady
Treasury yields initially dropped on recession fears but moderated after Powell’s cautious comments. The yield on the 10-year Treasury fell to 4.01%, down from 4.06% the previous day. Earlier in the morning, it briefly dipped below 3.90%.
Market at a Crossroads
With the S&P 500 now down 17.4% from its February high, the central question remains: will this tariff tit-for-tat snowball into a full-blown global recession?
Investors and policymakers alike are bracing for a rocky road ahead, watching closely to see if Trump’s brinkmanship yields concessions—or backfires spectacularly. Until there’s clarity, volatility may be the new normal.
