A drone view shows containers at the terminals at the port in Kwai Chung in Hong Kong, China, April 3, 2025. REUTERS/Tyrone Siu
Global Stock Markets Tumble as U.S.-China Trade War Intensifies
PALM BEACH, Florida / BEIJING / WASHINGTON — April 4 (Reuters): Global stock markets declined sharply on Friday following China’s announcement of additional tariffs on U.S. goods, a move that significantly escalated the ongoing trade war with the United States. The announcement further rattled investor confidence and deepened fears of a global recession.
Major Indices Record Heavy Losses
U.S. equity markets continued to fall after the Trump administration’s broad tariff measures triggered a $2.4 trillion loss in market value. The S&P 500 fell by 5.4%, the Nasdaq dropped 5.3%, and the Dow Jones Industrial Average declined 4.9% by mid-afternoon Friday.
Shares in large technology firms with substantial supply chain exposure to China and Taiwan were among the hardest hit. Apple Inc. fell 6.4%, while Nvidia Corp. dropped 7.7%. The Nasdaq appeared poised to enter bear market territory, on track to close more than 20% below its all-time high recorded in December.
“This is significant and is unlikely to be over, hence the negative market reactions,” said Stephane Ekolo, Market and Equity Strategist at Tradition in London. “Investors are afraid of a ‘tit for tat’ trade war situation.”
China Responds with Tariffs and Export Controls
China imposed a 34% tariff on all U.S. imports and announced restrictions on the export of certain rare earth elements. Additionally, Beijing placed 11 U.S. organizations on its “unreliable entity” list, citing connections to arms sales to Taiwan, which China considers part of its territory.
Other countries impacted by the U.S. trade measures, including Canada, have also prepared retaliatory steps, contributing to the broad market sell-off.
Recession Risks Increase
J.P. Morgan revised its estimate for the likelihood of a global recession by the end of the year from 40% to 60%, reflecting growing concerns over the economic fallout from prolonged trade tensions.
Federal Reserve Chair Jerome Powell, speaking at a business journalists’ conference, described the newly implemented tariffs as “larger than expected” and noted that they increase the risk of both elevated inflation and slower economic growth. He added that while the Fed would monitor incoming data before making any policy changes, the central bank’s priority remained keeping inflation expectations stable.
Powell did not comment directly on the stock market losses but acknowledged that the heightened uncertainty had caused many businesses to delay investment decisions. “People are just kind of waiting for clarity,” he stated. “I can’t tell you when that will pass, but ultimately it will pass.”
Trump Urges Fed to Act
Prior to Powell’s remarks, President Trump used social media to call on the Federal Reserve to cut interest rates, writing, “CUT INTEREST RATES, JEROME, AND STOP PLAYING POLITICS!”
Trump has continued to defend the tariffs as necessary to address trade imbalances and to encourage manufacturing investment within the United States. In a post on social media, he said, “To the many investors coming into the United States and investing massive amounts of money, my policies will never change. This is a great time to get rich, richer than ever before!!!”
Following China’s response, Trump added: “China played it wrong, they panicked – the one thing they cannot afford to do!”
He also extended the deadline for Chinese technology firm ByteDance to sell the video-sharing platform TikTok by 75 days, stating a willingness to continue engaging with China “in good faith.”
Global and Domestic Reactions
U.S. Treasury Secretary Scott Bessent, in an interview with broadcaster Tucker Carlson, attributed the stock market decline more to the unexpected unveiling of China’s DeepSeek artificial intelligence tool than to the administration’s trade policies.
The White House highlighted unexpectedly strong March employment data from the U.S. Department of Labor as a sign of continued economic resilience, although analysts cautioned that the new tariffs could eventually weigh on labor market performance.
In contrast, Canadian employment figures showed a decrease for the first time since 2022, with businesses reportedly pausing hiring and implementing layoffs in response to tariff-related uncertainties.
International Concerns and Divisions
Japan’s Prime Minister Shigeru Ishiba described the tariffs as creating a “national crisis,” as Tokyo’s stock market experienced its worst week in years amid sharp losses in banking shares.
In Europe, shares also suffered steep declines. EU Trade Commissioner Maros Sefcovic reported a “frank” discussion with U.S. officials, during which he criticized the tariffs as “damaging” and “unjustified.” While the European Union reaffirmed its commitment to negotiations, it also indicated preparedness to defend its interests.
Divisions within the EU on how to respond persist. Countries including Ireland, Italy, Poland, and various Scandinavian nations have expressed caution against retaliatory actions. Meanwhile, French President Emmanuel Macron urged companies to halt investment in the U.S., although France’s Finance Minister Eric Lombard later warned that reciprocal tariffs would ultimately harm European consumers.
Consumer Impact and Future Outlook
Trump administration officials assert that the tariffs will help create domestic manufacturing jobs and improve export market access, though they acknowledged that the benefits may take time to materialize.
Economists warned that U.S. consumers could face higher prices on a wide range of goods. According to estimates from Rosenblatt Securities, a high-end Apple iPhone could cost nearly $2,300 if the company passes the added costs on to buyers.
The European Union is also bracing for the imposition of a 20% U.S. tariff on its goods. China’s retaliatory actions and the expanding scope of U.S. tariffs have cast uncertainty over the global trading system and fueled concerns about the broader economic outlook.
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