Dow Plunges Over 2,200 Points as China Strikes Back on Trump Tariffs

 

A sharp escalation in the ongoing trade war between the United States and China sent shockwaves through global financial markets on Friday, triggering a widespread sell-off on Wall Street and fueling fears of a looming global recession.

Market Meltdown Amid Tariff Tensions

The Dow Jones Industrial Average plummeted by 2,231 points, while the S&P 500 dropped 6% and the Nasdaq Composite declined 5.8%, officially entering bear-market territory with a 20% fall from its recent peak. The losses marked one of the most volatile trading sessions in recent years.

The turmoil followed China’s announcement that it will impose a 34% tariff on all U.S. goods starting next Thursday. The move comes in direct retaliation to President Donald Trump’s latest tariff hikes, intensifying concerns over the economic fallout of the deepening trade conflict.

Federal Reserve Chair Jerome Powell added to investor anxiety by warning that the U.S. economy is likely headed for a period of "higher prices and weaker growth" due to the unexpectedly aggressive scale of the new tariffs.

Investor Reaction and Economic Outlook

Markets reeled from the news, with only 14 S&P 500 companies managing gains for the day, while 28 fell by 10% or more. The total value lost in the past two days reached an unprecedented $6.6 trillion.

The increased tariffs, described by analysts as more severe than anticipated, have stoked fears of declining consumer spending and slowing GDP growth. Despite Trump's assurances that the U.S. is open to negotiating, his administration's decision to consider additional tariffs on pharmaceuticals and microchips offered little reassurance to investors.

JPMorgan analysts raised their forecast of a global recession to 60%, underscoring the growing unease on Wall Street.

Trump remained defiant, claiming "China played it wrong, they panicked," and suggesting it was a prime time to invest and profit. Meanwhile, Secretary of State Marco Rubio acknowledged the market turmoil, stating that while "markets are crashing," economies themselves are not and businesses would adapt.

Mixed Economic Signals and Global Impact

Despite the chaos, the U.S. labor market showed resilience, with a stronger-than-expected jobs report revealing 228,000 new jobs added last month. Still, this did little to calm market nerves.

Markets saw brief recoveries during the day following Trump’s remark that Vietnam's leadership is considering eliminating tariffs entirely. However, these rallies were short-lived as investor sentiment remained cautious.

European stock markets mirrored the U.S. downturn, with major indices falling over 4%. In response to heightened economic uncertainty, traders increased bets on interest rate cuts, anticipating intervention by the Federal Reserve to stabilize growth.

Oil prices continued their downward slide, with U.S. crude dipping to approximately $62 a barrel, approaching levels not seen since 2021. Meanwhile, investors sought refuge in safe-haven assets like U.S. Treasury bonds, sending 10-year yields below 4% before a late-day rebound.

Bond markets in other major economies, including Japan, Germany, and the U.K., also rallied. Concurrently, the U.S. dollar rebounded slightly after a sharp drop the previous day but remained near its weakest level of the year.

As the trade dispute intensifies, investors and policymakers alike are bracing for prolonged volatility and continued economic uncertainty.