Wall Street suffered a stunning collapse on Friday, as escalating tensions in the U.S.-China trade war triggered the sharpest losses for American markets since the COVID-19 panic of March 2020. The S&P 500 tumbled 6% in a single day, erasing hundreds of billions in market value, while the Dow Jones Industrial Average plunged 2,231 points, or 5.5%. The tech-heavy Nasdaq fell 5.8%, sinking more than 20% below its December high and officially entering bear market territory.
The market chaos was sparked by China’s swift and aggressive retaliation to President Donald Trump’s sweeping tariffs earlier in the week. On Friday, Beijing announced a matching 34% tariff on all U.S. imports, set to take effect April 10, in direct response to the U.S. move. The dramatic escalation between the world’s two largest economies deepened fears that the prolonged trade conflict could tip the global economy into recession.
Even a stronger-than-expected U.S. jobs report—typically a highlight for markets—couldn’t slow the sell-off. Employers added more jobs than anticipated last month, underscoring the continued resilience of the labor market in early 2025. But the data was largely dismissed by jittery investors focused on the looming economic damage that could follow from a drawn-out tariff war.
The losses capped the worst week for the S&P 500 in five years. Of the index’s 500 companies, only 14 closed in positive territory on Friday. Crude oil fell to its lowest price since 2021, while copper and other key industrial commodities slumped, as markets braced for weakened global demand. Overseas, markets fared no better. Germany’s DAX dropped 5%, France’s CAC 40 shed 4.3%, and Japan’s Nikkei 225 fell 2.8%.
The Federal Reserve, which had been considering rate cuts to stimulate growth, now faces a difficult balancing act. Fed Chair Jerome Powell warned Friday that tariffs could drive up inflation expectations, potentially making it riskier to lower interest rates. He said the central bank’s responsibility is to keep long-term inflation expectations anchored, and that a “one-time increase in the price level” could morph into a more permanent inflation problem if not carefully managed.
Despite the turmoil, Trump remained characteristically defiant. Speaking from Mar-a-Lago before heading to his nearby golf course, he posted on Truth Social: “THIS IS A GREAT TIME TO GET RICH.” He also mocked Beijing’s response, claiming, “CHINA PLAYED IT WRONG, THEY PANICKED – THE ONE THING THEY CANNOT AFFORD TO DO!” Trump has repeatedly insisted the short-term pain from tariffs will be worth it, likening the trade battle to a medical operation that, while painful, will ultimately make the U.S. economy stronger. “Some pain” for Americans, he has said, is necessary to bring manufacturing back home.
Markets saw some of their steepest losses in companies with heavy exposure to China. DuPont’s stock fell nearly 13% after Beijing opened an antitrust investigation into its Chinese operations. GE Healthcare, which earned 12% of its revenue from China last year, dropped 16%.
Bond yields fell sharply as investors scrambled for safety, though they trimmed some losses after Powell’s remarks. The yield on the 10-year Treasury dropped to 4.01%, after dipping below 3.90% earlier in the day.
Analysts warned that the full economic impact depends on how long tariffs remain in place and how quickly negotiations resume. Trump suggested Vietnam may be willing to lower its tariffs to zero in exchange for a deal with the U.S., giving some hope for a potential de-escalation. Still, with global financial markets on edge, few were optimistic about a fast resolution.
“The speed of recovery will depend on how quickly officials negotiate,” said Brian Jacobsen, chief economist at Annex Wealth Management. “For investors, it could have felt like an operation performed without anesthesia.”
