NEW YORK (AP) — The worst crisis on Wall Street since COVID intensified on Friday. The S&P 500 lost 322.44 points, or 6%, and closed at 5,074.08 after China responded with reciprocal measures to the tariff increase announced by Donald Trump a few days ago.
The measure intensifies a trade war that could end up in a recession that harms everyone. Not even a positive report on the US labor market was enough to stop the decline.
The day capped the worst week for the S&P 500 since March 2020, when the pandemic devastated the global economy. The Dow Jones Industrial Average plummeted 2,231.07 points, or 5.5%, to close at 38,314.86, while the Nasdaq composite dropped 962.82 points, or 5.8%, to end at 15,587.79, more than 20% below its record set in December.
The price of oil at its lowest level since 2021
So far, there have been few winners in the financial markets due to the trade war. Out of the 500 companies in the S&P 500 index, 486 fell on Friday.
The price of crude oil has dropped to its lowest level since 2021. Other essential elements for economic growth, such as copper, also saw their prices fall due to concerns that the trade war will weaken the global economy.
China’s response to the tariffs imposed by the United States caused an immediate acceleration of losses in global markets. The Ministry of Commerce in Beijing said it would respond to the 34% tariffs imposed by the United States on imports from China with its own 34% tariff on imports of all U.S. products starting on April 10th. The United States and China are the world’s two largest economies.
The job report did not stop the fall
The markets briefly recovered some of their losses after the release of the US jobs report on Friday morning, which indicated that employers ramped up their hiring last month more than economists had expected. This is the latest sign that the US labor market has remained relatively strong at the beginning of 2025, and has been a pillar keeping the US economy out of a recession.
But after this brief rebound in the New York Stock Exchange, the rest of the day everything went down.
The problem is that this employment data is a glimpse into the past, and the fear gripping financial markets is about what is yet to come.
The central question is: will the trade war cause a global recession? If it does, stock prices may need to fall even further than they already have. The S&P 500 has dropped 17.4% from its record high set in February.
Where is Trump? In his mansion in Florida
Trump seemed undisturbed. From Mar-a-Lago, his private club in Florida, he headed to his golf course a few kilometers away after writing on social media that “this is a great time to get rich.”
The Federal Reserve could cushion the blow of tariffs on the economy by cutting interest rates, which could encourage businesses and households to borrow and spend. However, the Fed may have less freedom to move than it would like.
Federal Reserve Chairman Jerome Powell said on Friday that tariffs could increase inflation expectations. That could be more harmful than high inflation itself, as it could lead to a vicious cycle of behavior that would only worsen inflation. American households have already stated they are preparing for sharp increases in their bills.
“Our obligation is to keep long-term inflation expectations well anchored and ensure that a one-time increase in the price level does not become a continuous inflation problem,” Powell commented.
That could indicate a reluctance to cut rates because lower rates can fuel inflation.
Much will depend on how long Trump’s tariffs last and what kind of retaliatory measures other countries implement. Part of Wall Street remains hopeful that the President of the United States will reduce tariffs after achieving “victories” through negotiations with other countries.
Trump has given mixed signals about it. On Friday, he said that Vietnam “wants to reduce its tariffs to zero if they can reach an agreement with the United States”. The Republican president also criticized China’s retaliation, and said on his Truth Social platform that “China did it wrong, they panicked. That’s the one thing they shouldn’t do”.
In foreign stock markets, Germany’s DAX lost 5%, France’s CAC 40 fell 4.3%, and Japan’s Nikkei 225 dropped 2.8%.
The yield on the 10-year Treasury bond decreased from 4.06% to 4.01%. It even dropped below 3.90% in the morning.