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Stocks plunge as China retaliates to Trump tariffs Stocks plunge as China retaliates to Trump tariffs
(about 2 hours later)
Turmoil on financial markets deepened on Friday, as China hit back at tariffs announced by Donald Trump, raising the likelihood of an extended trade war and damage to the global economy. Stock market turmoil deepened on Friday, as China hit back at tariffs announced by Donald Trump, raising the likelihood of an extended trade war and damage to the global economy.
All three major stock indexes in the US had plunged more than 5% in late afternoon trading, as the sell-off sparked by the tariffs announcement spread. All three major stock indexes in the US plunged more than 5%, with the S&P 500 dropping almost 6%, bringing to an end the worst week for the US stock market since 2020.
In the UK, the FTSE 100 plunged almost 5% - its steepest fall in five years, while Asian markets also dropped and exchanges in Germany and France faced similar falls. In the UK, the FTSE 100 plunged almost 5% - its steepest fall in five years, while Asian markets also dropped and exchanges in Germany and France faced similar declines.
Trump, who has vowed to remake the global trade order, dismissed concerns about the market shock, noting that the US labour market is strong.Trump, who has vowed to remake the global trade order, dismissed concerns about the market shock, noting that the US labour market is strong.
"Hang tough," he urged his followers on social media. "We can't lose.""Hang tough," he urged his followers on social media. "We can't lose."
The stock market has lost trillions in value over two days, a rout sparked by Trump's announcement of sweeping new 10% import taxes on goods from every country. The global stock market has lost trillions in value since Trump announced sweeping new 10% import taxes on goods from every country, with products from dozens of countries, including key trading partners such as China, the European Union and Vietnam, facing far higher rates.
Goods from dozens of countries, including key trading partners such as China, the European Union and Vietnam, face far higher rates.
Analysts say the moves, some of which are due to go into effect as soon as Saturday, amount to the biggest tax increase in the US since 1968.Analysts say the moves, some of which are due to go into effect as soon as Saturday, amount to the biggest tax increase in the US since 1968.
They expect the measures to lead to a contraction in trade, and have warned they could drive many countries into an economic recession.They expect the measures to lead to a contraction in trade, and have warned they could drive many countries into an economic recession.
Live: Follow the latest reaction to the US tariffsLive: Follow the latest reaction to the US tariffs
At a glance: What Trump's new tariffs mean for the EU, China and othersAt a glance: What Trump's new tariffs mean for the EU, China and others
Explainer: What are tariffs and why is Trump using them?Explainer: What are tariffs and why is Trump using them?
China responded to Trump on Friday by hitting US goods with import taxes of 34%, curbing exports of key minerals and adding US firms to its blacklist, describing Trump's actions as "bullying" and a violation of international trade rules.China responded to Trump on Friday by hitting US goods with import taxes of 34%, curbing exports of key minerals and adding US firms to its blacklist, describing Trump's actions as "bullying" and a violation of international trade rules.
Other countries have yet to respond and appear hoping they will be able to negotiate deals, despite conflicting signals from the White House about its appetite for talks. Other countries appear hoping they will be able to negotiate deals, despite conflicting signals from the White House about its appetite for talks.
Maroš Šefčovič, the trade commissioner for the EU, which has said it planned to retaliate, said Friday that he had a "frank" two-hour exchange with US officials, and wrote on social media that the trade relationship needed a "fresh approach".Maroš Šefčovič, the trade commissioner for the EU, which has said it planned to retaliate, said Friday that he had a "frank" two-hour exchange with US officials, and wrote on social media that the trade relationship needed a "fresh approach".
"The EU's committed to meaningful negotiations but also prepared to defend our interests," he said. "We stay in touch.""The EU's committed to meaningful negotiations but also prepared to defend our interests," he said. "We stay in touch."
Trump's moves are consistent with promises he had made on the campaign trail last year.Trump's moves are consistent with promises he had made on the campaign trail last year.
But they were still more far-reaching than many analysts had expected, sparking some of the worst days for the stock market since 2020, when the Covid-19 pandemic led to global shutdowns and other disruption.But they were still more far-reaching than many analysts had expected, sparking some of the worst days for the stock market since 2020, when the Covid-19 pandemic led to global shutdowns and other disruption.
The sell-off started with firms such as Apple and Nike, which rely heavily on suppliers in Asia. But on Friday, it moved into sectors that would typically not face direct impact of tariffs, such as healthcare and utilities. The sell-off started with firms such as Apple and Nike, which rely heavily on suppliers in Asia. But on Friday, it moved into sectors that would typically not face direct impact of tariffs, such as consumer staples, healthcare and utilities.
"Candidly the mood is pretty sour and it should be," said Mike Dickson, head of research and quantitative strategies at Horizon Investments in the US, warning that it will take weeks to understand the impact of Trump's tariffs."Candidly the mood is pretty sour and it should be," said Mike Dickson, head of research and quantitative strategies at Horizon Investments in the US, warning that it will take weeks to understand the impact of Trump's tariffs.
"What we're really worried about right now is what we saw at 6am-ish [when China retaliated]," he said, "How much more of that is out there?""What we're really worried about right now is what we saw at 6am-ish [when China retaliated]," he said, "How much more of that is out there?"
EU products are facing a 20% tariff
In a note to investors, JP Morgan said it now put the odds of a global economic recession this year at 60%, up from 40% previously, noting that the shock from the tariffs could drive growth in the US down by 2 percentage points this year.
Some investors downplayed the losses, noting that they follow an astonishing run-up in the value of share prices in the US over the past few years.Some investors downplayed the losses, noting that they follow an astonishing run-up in the value of share prices in the US over the past few years.
"These shifts in the market that we're seeing in the market - they're violent because things go down a lot quicker than they go up," said Tim Pagliara, chief executive of Tennessee-based CapWealth."These shifts in the market that we're seeing in the market - they're violent because things go down a lot quicker than they go up," said Tim Pagliara, chief executive of Tennessee-based CapWealth.
He said the White House was attempting a "big reset" in global trade but the effort was needed.He said the White House was attempting a "big reset" in global trade but the effort was needed.
"We've talked about trade imbalance my entire career. Nothing's ever happened. So something has to happen," he said. "We are going to level the playing field on some of these relationships that have just gotten out of balance.""We've talked about trade imbalance my entire career. Nothing's ever happened. So something has to happen," he said. "We are going to level the playing field on some of these relationships that have just gotten out of balance."
Speaking on Friday, Jerome Powell, the head of the US central bank, said he thought the economy remained "solid", pointing to the latest data showing strong hiring in the US in March.Speaking on Friday, Jerome Powell, the head of the US central bank, said he thought the economy remained "solid", pointing to the latest data showing strong hiring in the US in March.
But he acknowledged a high degree of uncertainty.But he acknowledged a high degree of uncertainty.
"What we've learned is that the tariffs are higher than anticipated, higher than almost all forecasters predicted," Mr Powell said, warning that growth would slow and prices were likely to rise."What we've learned is that the tariffs are higher than anticipated, higher than almost all forecasters predicted," Mr Powell said, warning that growth would slow and prices were likely to rise.
Shares in Nike, and other clothing retailers, which had been hammered on Thursday clawed back some ground on Friday, buoyed by hopes of a deal after Trump said he had a "very productive call" with the leader of Vietnam. In the US, housing-related firms were a bright spot in the markets, perhaps rallying on hopes that the turmoil could lead to lower interest rates for mortgages and help the US housing market.
Shares in Nike, and other clothing retailers, which had been hammered on Thursday also clawed back some ground on Friday, buoyed by hopes of a deal after Trump said he had a "very productive call" with the leader of Vietnam.
Cambodia also sent a letter offering to reduce tariffs and asking the US to negotiate.
But other parts of the market remained bleak.But other parts of the market remained bleak.
Apple, which relies heavily on China for manufacturing, shares fell 6% on Friday. The iPhone maker's market value has dropped roughly 15% since Wednesday. Shares in Apple, which relies heavily on China for manufacturing, fell more than 7% on Friday. The iPhone maker's market value has dropped roughly 15% since Wednesday.
The Dow Jones fell 5.5%, bringing it down 10% from its February peak - a milestone known as a correction.
The Nasdaq dropped 5.8%, wiping out roughly a fifth of its value since December.
In the UK, the FTSE 100 index closed 4.9% lower, the biggest one-day drop since 27 March 2020.In the UK, the FTSE 100 index closed 4.9% lower, the biggest one-day drop since 27 March 2020.
In Europe, France's CAC 40 dropped 4.3% while in Germany the Dax fell almost 5%.In Europe, France's CAC 40 dropped 4.3% while in Germany the Dax fell almost 5%.
Earlier, in Japan, where the prime minister called the situation a "national crisis", the Nikkei 225 fell more than 2.7%.Earlier, in Japan, where the prime minister called the situation a "national crisis", the Nikkei 225 fell more than 2.7%.
Trump's announcement on Wednesday left goods from China facing an added 34% tariff rate, raising the overall levy to at least 54%. Brent crude, the international oil price benchmark, also dropped almost 6%.
He announced a new 20% tax on goods from the EU, and rates of more than 40% on countries in Asia such as Vietnam, which have become key centres of manufacturing since Trump started raising tariffs on China in his first term. As the rout continued, even some White House allies started to criticise the measures.
"The shock factor… was Vietnam," said Simeon Siegel, managing director at BMO Capital Markets, who follows companies such as Nike, which saw shares tumble on Thursday after the announcements. On a podcast devoted to tariffs, Republican Senator Ted Cruz of Texas said Trump's moves could lead to benefits for the US, while warning of "enormous risks".
"For the past many years, most companies had been trained to believe they needed to lean out from China, but that didn't mean lean into the US," he added. "But the only place to hide, at least as of [Trump's announcement], was the US." "If we're in a scenario 30 days from now, 60 days from now, 90 days from now, with massive American tariffs, and massive tariffs on American goods in every other country on earth, that is a terrible outcome," he said.
The tariff announcements have shaken confidence in the US and abroad.
In Kansas, Louise and Vance Ehmke sat awake this week at 3am worried for their wheat and rye seed farm.
They said they expected tariffs Trump imposed last month on steel and aluminium to raise prices for the plough blades that they buy from Canada.
Their industry, which sells many of its crops abroad, is also bracing for other countries to retaliate.
"It's not good news for us farmers and it sure as hell is not good news for anybody who buys anything imported," said Vance.
In the Falkland Islands, an archipelago in the South Atlantic Ocean, Janet Robertson, the general manager of Consolidated Fishing Limited, was wondering how a new 42% tax on its exports to the US would hit its sales of toothfish.
"At the moment, we're not making any dramatic decisions," she said.
But, she added, fishing is "by far the most important industry in the Falklands".
"The sales of toothfish into the States are a big part of that," she said.
"We're wondering where it will all end up."
Reporting contributed by Tom Espiner, Cai Pigliucci and the BBC's World Service.