Wall Street suffered one of its worst meltdowns in years on Friday, as escalating trade tensions between the U.S. and China triggered a mass sell-off and pushed major indexes into correction and bear territory.
The Dow Jones Industrial Average plummeted by 2,231 points, marking a 5.5% drop—its steepest two-day slide since the early pandemic crash in March 2020. The S&P 500 fell 5.97%, and the Nasdaq Composite tumbled 5.82%, closing in a bear market for the first time since 2022 after falling more than 20% from its all-time high.
The S&P 500 lost over $5 trillion in value in just two days, according to S&P Dow Jones Indices. The Dow, meanwhile, is officially in correction territory—down more than 10% from December highs.
Tariff War Turns Fierce
The market chaos was fueled by China’s announcement of 34% tariffs on all U.S. goods starting April 10, a direct response to President Donald Trump’s escalating tariff campaign. In just two months, Trump has raised tariffs on Chinese imports from 10% to a projected 54%, setting the stage for a full-scale trade war between the world’s two largest economies.
“Markets may actually be underreacting,” warned Matt Burdett of Thornburg Investment Management. “These new tariffs could significantly impact global consumption, trade, and inflation.”
Trump, however, remained defiant. Posting on social media, he claimed to have had a “very productive” call with Vietnam’s General Secretary To Lam, who allegedly expressed willingness to lower tariffs to zero. The news briefly lifted stocks like Nike (NKE)—up 3% due to its deep ties to Vietnamese manufacturing—but the rally quickly faded.
Powell Warns of Long-Term Impact
Federal Reserve Chair Jerome Powell added to investor anxiety, warning that Trump’s aggressive tariffs could result in higher inflation and slower growth. “The size and duration of these effects remain uncertain,” Powell said in prepared remarks Friday.
The Cboe Volatility Index (VIX), Wall Street’s fear gauge, surged 50%, while CNN’s Fear and Greed Index plunged to its lowest level this year.
Investors scrambled into safe-haven assets. Gold briefly soared above $3,130 per ounce before settling near $3,030, while the 10-year Treasury yield dropped below 4% for the second consecutive day as bond prices rose.
Oil was hammered. U.S. crude fell 7.4% to $61.99, its lowest level since 2021. Brent crude dropped 6.5%, driven by fears that the trade war could derail global economic growth.
Tech Stocks Take a Hit
Tech stocks, many of which rely heavily on global supply chains, were among the hardest hit. Apple (AAPL), already down 9% Thursday, fell another 7.3% Friday.
Trump, meanwhile, continued to talk up the U.S. economy online, urging investors to “get rich, richer than ever before!!!” despite the dramatic selloff.
Global Fallout
Markets around the world followed Wall Street’s plunge. The STOXX 600 index dropped 5.12%, and London’s FTSE 100 lost 4.95%, both marking their biggest single-day losses since 2020. Japan’s Nikkei 225 declined 2.75% after a 2.77% slide the day before.
Economists are raising red flags. JPMorgan now puts the odds of a U.S. or global recession at 60%, a risk heightened by growing retaliatory measures. UBS cut its year-end forecast for the S&P 500 from 6,400 to 5,800 and warned of a “meaningful recession” if Trump does not reverse course.
“This is just the beginning,” said Joe Brusuelas of RSM. “The EU and others are likely to follow China’s lead with targeted retaliation.”
Allies Respond Differently
Some allies are seeking dialogue. The UK confirmed it’s in discussions with Washington to reduce trade barriers, while France signaled the EU may avoid direct tariffs but could target U.S. firms, like Tesla.
Others have chosen tit-for-tat tactics. Canada announced tariffs on U.S.-made cars, escalating the regional trade pressure.
Trump’s Trade Gambit
Despite the market fallout, Trump remained upbeat about using tariffs as leverage in future negotiations—citing TikTokas an example of potential deals. “The tariffs give us great power to negotiate,” Trump told reporters on Air Force One.
Still, uncertainty reigns.
“The market’s no longer focused on fundamentals like job growth,” said Chris Zaccarelli of Northlight Asset Management. “It’s all about trade wars now—and the fear that the U.S. is dragging the global economy into a downward spiral.”
