PALM BEACH, Florida/BEIJING/WASHINGTON — Global stock markets plummeted further on Friday (April 4) after China said it would strike back at US President Donald Trump with additional tariffs of 34 per cent on US goods, escalating a trade war that has rattled investors and fed fears of a coming recession.

The trade war has spurred the biggest market losses since the pandemic.

The Nasdaq Composite's slide confirmed a bear market for the tech-heavy index, compared to its record closing high of 20,173.89 on Dec 16. Meanwhile, the Dow Jones Industrial Average confirmed a correction to its record closing high of 45,014.04 on Dec 4.

Intensifying the standoff between the world's two biggest economies, Beijing also announced controls on exports of some rare earths, while Trump doubled down as well, vowing not to change course.

China added 11 US bodies to the "unreliable entity" list, which allows Beijing to take punitive actions against foreign entities, including firms linked to arms sales to democratically governed Taiwan, which China claims as part of its territory.

Other impacted nations like Canada have also readied retaliation in a mounting trade war after Trump raised US tariff barriers to the highest levels in more than a century, leading to a plunge in world financial markets.

For the week, the S&P 500 fell 9.08 per cent, the Nasdaq declined 10.02 per cent, and the Dow fell 7.86 per cent. The Russell 2000 Small Cap Index dropped 9.70 per cent.

Investment bank J.P. Morgan estimated a 60 per cent chance of the global economy entering a recession by year-end, up from 40 per cent previously.

"This is significant and is unlikely to be over, hence the negative market reactions," said Stephane Ekolo, Market & Equity Strategist, Tradition, London. "Investors are afraid of a 'tit for tat' trade war situation."

Republican US Senator Ted Cruz, a staunch Trump supporter, warned on Friday that the tariffs could pose "enormous risks" for the US economy and for Republicans' political fortunes.

"The effect of this is trillions of dollars of increased taxes on American consumers," he said on his podcast.

Cruz said he is hopeful that Trump will use the tariffs as leverage to convince other countries to lower their own trade barriers, a result he said he would applaud. But he cautioned that a prolonged trade war would be a "terrible outcome" for Americans.

Cruz, however, was given an opportunity earlier this week to register his opposition to Trump's trade policies when the US Senate passed legislation that would terminate new tariffs on Canada. Cruz voted in the minority to stand with the president.

As the market selloff intensified, Trump was largely out of public view at his golf course, where he sent multiple defiant social media messages guaranteeing victory for the US economy.

After returning to his Florida Mar-a-Lago residence shortly before 4pm (4am Singapore time), White House staff told press not to expect Trump to make any public appearances for the remainder of the day.

Federal Reserve Chair Jerome Powell told a business journalists conference on Friday the tariffs were "larger than expected" and elevated the risk of both higher inflation and slower growth.

The Fed can wait for more data to decide how monetary policy should respond, but it will focus on keeping inflation expectations anchored if Trump's tariffs sparked more persistent price pressures, Powell said.

He did not directly address the US stocks selloff but acknowledged that uncertainty had paused business decisions.

"People are just, they just are kind of waiting for clarity," Powell said. "I can't tell you when that will pass, but you know, ultimately it will pass."

Just before Powell spoke, Trump said in a Truth Social post that it was the "perfect time" for the Fed to cut interest rates. "CUT INTEREST RATES, JEROME, AND STOP PLAYING POLITICS!" Trump wrote.

Global effects

Trump's team has characterised the market turbulence as an adjustment that would prove beneficial in the long run.

In an interview with conservative host Tucker Carlson released on Friday, US Treasury Secretary Scott Bessent asserted that the plunge in US stocks was driven more by the surprise emergence of China's DeepSeek artificial intelligence tool than by Trump's policies.

The White House touted stronger-than-expected job data on Friday, after a Labor Department report showed the US economy added far more jobs in March than predicted.

But Trump's sweeping import tariffs could test the labour market's resilience in the months ahead amid sagging business confidence.

"To the many investors coming into the United States and investing massive amounts of money, my policies will never change. This is a great time to get rich, richer than ever before!!!" Trump said in a social media post in all caps.

After Beijing's retaliation, he posted: "China played it wrong, they panicked — the one thing they cannot afford to do!"

The 10 per cent baseline tariffs for US imports go into effect on Saturday but shipments under way by then have until May 27 to arrive tariff-free, according to US Customs and Border Protection.

Trump also said on Friday he was extending by 75 days a deadline for Chinese technology company ByteDance to sell the short video app TikTok or face a US ban.

In contrast to the US labour report, Canada's total employment fell and the unemployment rate ticked up in March, data showed on Friday. The country's first monthly decrease in jobs since 2022 was prompted by uncertainty around tariffs, which forced companies to pause hiring and spurred some layoffs.

In Japan, one of the top US trading partners, Prime Minister Shigeru Ishiba said the tariffs had created a "national crisis" as a plunge in banking shares on Friday set Tokyo's stock market on course for its worst week in years.

Divisions and mixed signals

With European shares also tumbling to the biggest weekly losses in years, the European Union's trade commissioner, Maros Sefcovic, said he held a "frank" two-hour call with US Secretary of Commerce Howard Lutnick and US Trade Representative Jamieson Greer.

"I was clear: US tariffs are damaging, unjustified," Sefcovic wrote on social media. "The EU's committed to meaningful negotiations but also prepared to defend our interests."

The EU is divided on how best to respond to Trump's tariffs. Countries cautious about retaliating and thereby raising the stakes in the standoff with the US include Ireland, Italy, Poland and the Scandinavian nations.

French President Emmanuel Macron led the charge on Thursday by calling on companies to freeze investment in the US.

However, French Finance Minister Eric Lombard later cautioned against like-for-like countermeasures on the US tariffs, warning this would also rebound on European consumers.

The US tariffs could jack up the price for US shoppers of everything from cannabis to running shoes to Apple's iPhone. A high-end iPhone could cost nearly US$2,300 (S$3,090) if Apple passes the costs on to consumers, based on projections from Rosenblatt Securities.

China is retaliating for Trump's tariffs on imports from the world's No. 2 economy. The European Union faces a 20 per cent duty.

Trump says "reciprocal" tariffs are a response to barriers put on US goods, while administration officials said the tariffs would create manufacturing jobs at home and open up export markets abroad, although they cautioned it would take time to see results.

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Source: Reuters