Sunday, May 4, 2025

Markets Tumble Worldwide as Tariff Escalation Fuels Recession Fears

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Global stock markets tumbled following China’s announcement of retaliatory tariffs against the United States, fueling fears of a potential worldwide recession.

Wall Street plunged on Friday, as the Dow Jones lost 5.50%, the S&P 500 slid 5.97%, and the Nasdaq dropped 5.82%, posting deeper losses than the day before. The previous day, the Dow had plunged 3.98%, the S&P 500 dropped 4.84%, and the Nasdaq tumbled 5.97%. This sell-off represented the steepest one-day drop for all three major indices since June 2020, during the peak of the COVID-19 pandemic.

The market downturn was driven by a combination of China’s retaliatory tariff announcement and Jerome Powell’s warning that trade tensions could lead to sustained inflation. European markets also ended the day sharply lower. Germany’s DAX lost 4.95%, France’s CAC 40 fell 4.26%, and the UK’s FTSE 100 dropped 4.95%. The pan-European STOXX 600 index plunged 5.12%, crossing the 5% threshold.

Asian markets had already responded earlier in the day. Japan’s Nikkei slipped 2.75%, South Korea’s KOSPI fell 0.86%, Australia’s ASX declined 2.44%, Hong Kong’s Hang Seng dropped 1.52%, and China’s Shanghai Composite edged down 0.24%.

Analysts attributed the relatively smaller losses in Asia to the region’s earlier reaction to the Trump administration’s initial tariff announcement, with Japan’s Nikkei having already fallen about 4% the previous day.

On Friday, China declared that it would impose a 34% tariff on all U.S. products beginning April 10, mirroring the 34% tariffs the U.S. levied on Chinese goods on April 2.

This tit-for-tat escalation has deepened fears that the trade conflict could push both the U.S. and the global economy into a recession, triggering widespread sell-offs across global markets.

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