Global Markets Tumble as U.S.-China Trade War Escalates

PALM BEACH, Florida, April 4 (Reuters) – Global stock markets plummeted on Friday after China announced retaliatory tariffs of 34% on U.S. goods, escalating an ongoing trade war and heightening fears of a recession. This marked the most significant market downturn since the onset of the COVID-19 pandemic.

The Nasdaq Composite’s decline confirmed a bear market, dropping from its record high of 20,173.89 on December 16. The Dow Jones Industrial Average also fell sharply from its previous peak of 45,014.04 on December 4.

Beijing’s latest move included controlling exports of select materials, intensifying the standoff between the world’s two largest economies. In response, President Donald Trump remained defiant, asserting that he would not change course despite the mounting economic pressure.

China added 11 U.S. companies to its “unreliable entity” list, allowing punitive actions against foreign entities linked to arms sales to Taiwan, which China claims as its territory. The escalating tariffs have triggered broader implications, with countries including Canada poised to retaliate against Trump’s heightened tariffs, the highest in over a century.

This week alone, the S&P 500 plummeted by 9.08%, the Nasdaq by 10.02%, and the Dow by 7.86%. The Russell 2000 Small Cap Index fell by 9.70%. J.P. Morgan’s recent analysis indicates a 60% likelihood of a global recession by year-end, up from 40% previously.

“This is significant and is unlikely to be over,” said Stephane Ekolo, Market & Equity Strategist at Tradition, London. “Investors are afraid of a ‘tit for tat’ trade war situation.”

Senator Ted Cruz, a prominent Trump supporter, expressed concerns that the tariffs could have “enormous risks” for both the U.S. economy and Republicans’ political prospects. “The effect of this is trillions of dollars of increased taxes on American consumers,” Cruz stated in his podcast.

Although Cruz supports using tariffs to encourage other nations to lower trade barriers, he acknowledged potential dangers: “A prolonged trade war would be a terrible outcome for Americans.” In a recent Senate vote regarding tariffs on Canada, Cruz sided with Trump, although it was a minority position.

While the market selloff intensified, President Trump was relatively out of public sight, reportedly at his golf course, where he sent multiple messages affirming a strong U.S. economy via social media. “To the many investors coming into the United States and investing massive amounts of money, my policies will never change,” Trump stated. “This is a great time to get rich, richer than ever before!!!”

The President criticized China for what he described as a “mistake” in their response, insisting that they “panicked” instead of taking a more measured approach.

The baseline tariffs on U.S. imports are set to take effect on Saturday, with shipments already in transit allowed to arrive tariff-free until May 27, according to U.S. Customs and Border Protection.

In a separate statement, Treasury Secretary Scott Bessent attributed the U.S. stock plunge more to China’s recent unveiling of an AI tool rather than solely to Trump’s tariffs. The White House highlighted job data on Friday, which showed that the U.S. economy added significantly more jobs in March than analysts predicted; however, the uncertain tariff landscape may pose future challenges to the job market.

Meanwhile, Canadian data indicated a rise in unemployment in March, signaling the first monthly job dip since 2022, largely attributed to the uncertainty surrounding U.S. tariffs.

As turmoil ripples through global markets, Japan‘s Prime Minister Shigeru Ishiba termed the tariffs a “national crisis,” which contributed to a historic decline in Tokyo’s stock market.

In Europe, concerns mount as trade commissioner Maros Sefcovic stated that he had a “frank” discussion with U.S. officials about the damaging effects of Trump’s tariffs, pledging that the EU is prepared to defend its interests. Tensions within the EU about how to react to the tariffs remain, with varied apprehensions among member states.

French President Emmanuel Macron called for caution, urging companies to halt investments in the U.S. while Finance Minister Eric Lombard advised against direct retaliatory measures, cautioning against increased costs impacting European consumers.

As the trade war intensifies, the ramifications on everyday goods could escalate dramatically, with projections indicating significant price increases for popular items. Rosenblatt Securities estimates that if Apple passes costs from tariffs onto consumers, a high-end iPhone could sell for nearly $2,300.

Despite administration claims that tariffs will lead to more domestic manufacturing jobs, experts warn that such economic adjustments might take time and could strain consumer and business confidence amidst the current uncertainty.