On Friday, the stock market took a significant hit as China retaliated against tariffs imposed by US President Donald Trump, increasing fears of a prolonged trade war that could harm the global economy.

All three major US stock indexes fell by over 5%, with the S&P 500 experiencing a nearly 6% drop, marking the worst week for US stocks since 2020.

In the UK, the FTSE 100 plummeted nearly 5%, its largest decline in five years, while Asian markets also saw losses, and exchanges in Germany and France faced similar downturns.

Trump, who aims to reshape the global trade landscape, downplayed the market turmoil, pointing out the strength of the US labor market.

“Stay strong,” he encouraged his social media followers. “We can’t afford to lose.”

Following Trump’s proposal for a sweeping 10% tax on imports from all countries, global stock markets have plummeted by trillions of dollars. Products from numerous nations, including major trading partners like China, the European Union, and Vietnam, are now facing significantly increased tariffs

Experts believe these actions, some of which could take effect as early as Saturday, represent the largest tax hike in the US since 1968.

They anticipate that these measures will result in a decrease in trade and have cautioned that they could push many nations into economic recession.

China retaliated against Trump’s tariffs by imposing a 34% import tax on American goods, restricting exports of essential minerals, and placing U.S. companies on its blacklist. They characterized Trump’s actions as “bullying” and a breach of international trade regulations.

Meanwhile, other nations are optimistic about the possibility of negotiating agreements, even though the White House has sent mixed signals regarding its willingness to engage in discussions.

Maroš Šefčovič, the EU’s trade commissioner, who has been considering a counter-response, stated on Friday that he had a “frank” two-hour conversation with U.S. officials. He expressed on social media that the trade relationship requires a “fresh approach.”

“The EU is dedicated to meaningful negotiations but is also ready to protect our interests,” he remarked. “We stay in touch.

Trump’s actions reflect the promises he made during his campaign last year. However, the consequences have turned out to be more significant than many experts expected, leading to the largest drop in the stock market since 2020, a period marked by the widespread shutdowns due to the Covid-19 pandemic.

The decline started with major companies like Apple and Nike, which rely heavily on suppliers from Asia. By Friday, the impact had extended to industries that usually remain unaffected by tariffs, such as consumer goods, healthcare, and utilities.

“The mood is certainly grim, and justifiably so,” said Mike Dickson, head of research and quantitative strategies at Horizon Investments in the US. He warned that it might take weeks to fully understand the effects of Trump’s tariffs.

“What worries us the most right now is the reaction we saw around 6 a.m. when China responded,” he added. “How much more volatility can we anticipate?”

In a recent update to investors, JP Morgan has changed its prediction for a global economic recession this year, now estimating the chances at 60%, up from the earlier 40%. The company pointed out that tariffs could cut US growth by two percentage points this year.

Some investors have minimized the significance of these losses, pointing out that they follow an impressive surge in US stock prices over recent years.

“The fluctuations in the market are quite drastic, with declines occurring at a much quicker pace than the increases,” stated Tim Pagliara, CEO of CapWealth in Tennessee. He also noted that the White House is pursuing substantial reforms in global trade, which he believes are essential.

During my career, discussions about trade imbalances have been frequent, yet little has improved. It’s time for us to take decisive action,” he stated. “Our objective is to rectify the imbalanced relationships that have emerged.”

On Friday, Jerome Powell, the chair of the Federal Reserve, shared his view that the economy is still “solid,” pointing to recent data showing strong job growth in the US during March. However, he also acknowledged the ongoing uncertainty.

“We have found that the impact of tariffs is greater than we expected, surpassing the forecasts of almost all analysts,” Mr. Powell warned, suggesting that growth might slow down and prices could rise.

In New Jersey, Pat Muscaritolo, owner of Jacobson Appliance, voiced his worries that recent developments could force him to shut down his appliance store after 40 years in business. He has been urging his customers to make any necessary purchases as soon as possible.

“We’re not sure what prices will look like at the end of the month,” he said, predicting that the cost of items like refrigerators might jump by 30% to 40%.

On a brighter note, companies related to housing have shown some promise, possibly due to speculation that the current chaos could lead to lower mortgage interest rates, which would be a boost for the US housing market.

Shares of Nike and other clothing retailers, which suffered major losses on Thursday, bounced back a bit on Friday, thanks to optimism following Trump’s announcement of a “very productive call” with the leader of Vietnam.

Moreover, Cambodia has proposed lowering tariffs and has asked to negotiate with the US.

Despite this, the overall mood in the market remained bleak.

Apple’s stock, which relies heavily on manufacturing in China, dropped by more than 7% on Friday. The tech giant’s market value has fallen by about 15% since Wednesday.

The Dow Jones saw a significant drop of 5.5%, which means it has fallen a total of 10% since its peak in February. The Nasdaq also took a hit, dropping 5.8% and losing about 20% of its value since December, officially entering what is called a “bear market.” In the UK, the FTSE 100 index ended the day down 4.9%, marking its largest single-day decline since March 27, 2020. In Europe, France’s CAC 40 went down by 4.3%, and Germany’s DAX fell by almost 5%. Earlier in Japan, the prime minister described the situation as a “national crisis,” and the Nikkei 225 dropped more than 2.7%. On top of that, Brent crude oil prices, which are used as a global standard, decreased by nearly 6%.

As the rout continued, Concerns about the current policies have even started to emerge among some of the White House’s allies.

On a podcast dedicated to tariffs, Republican Senator Ted Cruz from Texas noted that while Trump’s measures could offer certain benefits to the US, they also carry “significant risks.”

He remarked, “If we find ourselves in a scenario 30, 60, or 90 days from now with elevated American tariffs and other nations imposing steep tariffs on American goods, it would lead to a catastrophic result.” In the Falkland Islands, located in the South Atlantic, Janet Robertson, the general manager of Consolidated Fishing Limited, voiced her concerns about how a new 42% export tax to the US would impact their toothfish sales.