Global financial markets were rattled this week, suffering their steepest declines since the COVID-19 pandemic of 2020, as tensions between the United States and China erupted into a full-scale tariff war. The dramatic downturn followed Beijing’s announcement of sweeping retaliatory tariffs on US imports, matching President Donald Trump’s earlier move to hike levies on Chinese goods.
The S&P 500 plunged 6%, the Dow Jones dropped 5.5%, and the tech-heavy Nasdaq slid 5.8%, capping a brutal week for investors around the globe. The selloff intensified fears of an imminent global recession, as the already fragile supply chains face a fresh wave of disruption.
“What Trump delivered on this so-called ‘Liberation Day’ was effectively an economic war declaration,” said Ole Hansen, head of commodity strategy at Saxo Bank. “In the short term, it raises the risk of chaos in global trade and weakens demand for key commodities, particularly energy and industrial metals.”
Currency markets mirrored the turbulence. The US dollar, after posting its worst daily drop since November 2022 on Thursday, rebounded slightly on Friday. Yet, it remains near a six-month low against the Swiss franc, as investors flocked to traditional safe havens such as the franc, euro, and yen—rather than the US dollar, which usually plays that role in times of crisis.
Hansen noted the dollar’s weakness stems from fears that the tariff-driven trade war could hit the US economy hardest. “There’s a broad narrative forming that these policies will cause greater disruption to the US than to other regions,” he added.
China’s countermeasures, effective April 10, include a 34% tariff on all US goods and export restrictions on rare earth elements—critical materials for electronics and defense technologies. The move drew a fierce response from Trump, who accused China of “panicking” in a blistering post on Truth Social.
JP Morgan Chase raised its forecast for a global recession to 60%, up from 40%, citing heightened risk from the rapid escalation. In a starkly titled report, “There Will Be Blood,” the bank warned that the cumulative 22 percentage point increase in US tariffs represents the biggest tax hike in the country since 1968.
The energy sector bore the brunt of the economic blow. Brent crude fell 6.5% on Friday to $65.58 a barrel, while US benchmark WTI dropped 7.4% to $61.99. Weekly losses for both benchmarks were the worst in over a year, with Brent down nearly 11% and WTI slumping over 10%.
Even gold, typically a safe haven in times of turmoil, couldn’t escape the bloodbath. After hitting a record high earlier in the week, prices reversed sharply amid broader market volatility.
Federal Reserve Chair Jerome Powell struck a cautious tone on Friday, saying the central bank is not ready to cut interest rates amid the current uncertainty. However, he acknowledged that the tariffs are larger than anticipated and could pressure both inflation and growth.
“A tremor ripples through the world of numbers,” economist Thomas Kolbe observed. “The mercantilist pivot of the United States is shaking up the global economic order, ushering in a volatile new era for trade and finance.