Global Markets Plunge Amid Intensifying Trade War Concerns

FRANKFURT, Germany — German stocks plummeted on Friday, April 4, with the DAX suffering its steepest weekly drop of 8.1% since February 2022. The market reaction was fueled by China’s retaliatory measures against President Donald Trump‘s 34% tariff hike on Chinese goods, escalating fears of a full-scale global trade war.

The DAX dropped 4.95% on April 4, closing at 20,642, its lowest point since January 15. Similarly, the index slid 3.01% the previous day. China’s countermeasures included significant tariffs on U.S. goods and firms, prompting concerns over an influx of low-priced Chinese goods into the European market.

Daniel Kral, Europe macro specialist at Oxford Economics, noted, “The value of Chinese goods exports to the U.S. and the EU is similar, between $450-500 billion. With many Chinese products shut out of the U.S. due to prohibitive tariffs, the EU should brace for a flood of products at dumping prices.” He added that competition has significantly risen between Chinese and European products, particularly impacting Italy and Germany.

Data showed that German factory orders stalled in February, marking a decline of 7% month-on-month in January, despite economists predicting a rebound of 3.5%. The stalling orders signaled a worrying trend of diminishing demand for German goods, even as global buyers made late orders ahead of U.S. tariffs.

As trade tensions mounted, bank stocks saw steep declines. Deutsche Bank led the sell-off with a drop of 9.77%, while Commerzbank fell by 5.38%. Further losses spread across critical sectors, with the auto sector, including Mercedes-Benz Group, declining by 5.21%; Fresenius Medical Care in the pharma sector fell 4.59%; while retail sector stocks such as Zalando and tech firms like Infineon Technologies dropped 6.51% and 7.08%, respectively.

Upcoming German industrial production and trade data scheduled for Monday, April 7, could shift market sentiment amid the ongoing global trade war. While positive results could temporarily lift investor confidence, many analysts warn that strength could be viewed as a temporary anomaly.

On the U.S. front, following the sell-off, the S&P 500 sank 4.8%, and the Dow Jones dropped 4.1%, marking their worst weekly performance since 2020. The tech-heavy Nasdaq index plunged 4.9%, sliding over 22% from its December highs.

The tech sector was particularly impacted, with major companies like Apple and Nvidia facing increased pressure due to dependencies on the Chinese market. Apple dropped 5% on Friday and is down 12% for the week as fears grow that tariffs could slice into profits. Nvidia fell 13.6% amid caution over data center spending.

An analyst from Wedbush has estimated a potential 15% reduction in overall tech earnings if tariffs remain effective, drawing parallels to disruptions seen during the early pandemic period.

As the geopolitical landscape continues to shift, treasury yields have fallen below 4%, signaling a flight to safety among investors with JPMorgan now estimating a 60% risk of recession. The coming days hinge on trade developments and U.S. inflation data, casting uncertainty over the trajectory of the DAX and global markets.