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| U.S. stock futures extended their sharp decline on Friday following President Donald Trump’s announcement of a reciprocal tariff strategy earlier in the week. |
Markets in Freefall: China Hits Back, $6.4 Trillion Vanishes from Wall Street
DECK
Global Markets Rattle as U.S.-China Trade War Erupts; Dow Suffers Historic Two-Day Loss
KEY FACTS
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What: Dow Jones drops 2,231 points after a historic 1,679-point fall
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When: Thursday and Friday, following Trump’s announcement of sweeping tariffs
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Where: U.S. financial markets; global impact felt
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Why: China imposes 34% tariff on U.S. goods in direct response to Trump’s new trade policy
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Impact: $6.4 trillion in market value erased in two days
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Sector Fallout: Tech and banking sectors hit hardest; Nasdaq enters bear market
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Volatility: Wall Street’s fear index spikes to levels not seen since early COVID-19 pandemic
SITUATION SNAPSHOT
Trading floors descended into chaos as red arrows flashed across monitors and brokers scrambled to respond to relentless selling pressure. The atmosphere on Wall Street was one of anxiety and disbelief as markets spiraled for a second consecutive day, fueled by escalating tensions between the world’s two largest economies.
WHAT WE KNOW
China’s finance ministry announced a retaliatory 34% tariff on all U.S. imports, effective April 10—one day after President Trump’s sweeping 54% reciprocal tariff is set to begin. The Dow Jones Industrial Average plunged 2,231 points on Friday, following a 1,679-point loss the day prior. Together, the two-day decline marks one of the most severe market downturns since the COVID-19 outbreak in 2020.
The Nasdaq dropped 962.82 points (5.8%) and the S&P 500 sank 322.44 points (5.97%). The Nasdaq has now lost over 20% since December, entering official bear market territory.
The CBOE Volatility Index (VIX), often referred to as Wall Street’s fear gauge, spiked to its highest level since April 2020.
Federal Reserve Chair Jerome Powell, speaking in Arlington, Virginia, acknowledged that the new tariffs were likely to intensify inflationary pressure and warned of possible prolonged impacts.
Bank stocks slumped further as expectations for aggressive rate cuts by the Fed mounted. Bank of America, JPMorgan Chase, and Citigroup all dropped over 7%.
Tech companies with strong exposure to China also suffered heavy losses—Apple tumbled 7.3%, while the chipmakers index fell 7.6%.
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| Wall Street is reeling from another punishing Friday, following President Trump’s tariff announcement earlier this week. (Image: Pexels) |
WHAT’S NEXT
Markets will remain closed over the weekend, but all eyes are on Monday’s open, with investors bracing for further declines. Analysts expect volatility to persist as China and other nations consider countermeasures. A White House briefing is expected early next week, where officials may unveil additional economic responses or seek diplomatic offramps.
The Federal Reserve is under pressure to act swiftly, with futures now pricing in a full percentage point in rate cuts by year’s end—up from 75 basis points forecasted just a week ago.
VOICES ON THE GROUND
“For investors looking at their portfolios, it could have felt like an operation performed without anesthesia,” — Brian Jacobsen, chief economist at Annex Wealth Management.
“We’re beginning to see the inevitable retaliation from the global trade partners of the United States. The risk is that this tips a recession scare into a full-blown recession,” — Ben Laidler, head of equity strategy at Bradesco BBI.
“While tariffs are highly likely to generate at least a temporary rise in inflation, it is also possible that the effects could be more persistent,” — Jerome Powell, Federal Reserve Chair.
“Expect the ride ahead to produce some very big tests and shakeouts that will be great tests of investors’ skills as the critically important monetary, domestic political, and international geopolitical orders are breaking down,” — Ray Dalio, CIO at Bridgewater Associates.
“The [economic] outlook now is much worse than it was [before the election] so I would expect stock prices to continue going further down at least until some substantive change in policy is either announced by the White House or forced by congressional leaders,” — Professor Brett House, Columbia Business School.
“To anyone on Wall Street this morning, I would say trust in President Trump,” — Karoline Leavitt, White House Press Secretary.
“At the very least the Commerce Secretary should’ve come out and explained,” — Professor Nicholas Economides, NYU.
CONTEXT
This escalation marks a dramatic revival of the U.S.-China trade conflict, last seen during Trump’s first term. Then, markets endured waves of volatility as tariffs disrupted supply chains and fueled inflation concerns. Economists warn that the current standoff could have deeper consequences, given higher inflation baselines and global economic fragility.
The S&P 500's latest plunge follows a year of cautious optimism among investors who had bet on a soft landing for the U.S. economy. That optimism has now been upended.
REPORTER INSIGHT
From the trading floors to university lecture halls, the sentiment is the same—uncertainty. The air on Wall Street is thick with tension, and veteran traders liken the current selloff to “a storm without a compass.” As headlines continue to shift hourly, the mood across global financial centers is unmistakably grim, with analysts describing this moment as a test of endurance—and clarity—in economic policy.
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