Global markets nosedive in worst week since 2020 as China hits back against US tariffs

Global stock markets further spiralled on Friday, marking the worst week since during the Covid pandemic in 2020, after China retaliated against US President Donald Trump's tariffs with its own additional levies on US goods, heightening fears of full-blown international trade wars and the risk of a global economic recession.

The S&P 500 sank six per cent, the Dow Jones Industrial Average plummeted 5.5 per cent and the Nasdaq composite dropped 5.8 per cent.

“What Trump delivered on this so-called 'Liberation Day' was an economic war declaration likely to cause chaos across global supply chains, while in the short term raising the risk of an economic fallout, hurting demand for key commodities, with energy and industrial metals being the sectors most at risk,” said Ole Hansen, head of commodity strategy at Saxo Bank, on Friday.

The US dollar had plunged 1.9 per cent on Thursday, its worst day since November 2022, but rose nearly one per cent on Friday. Th dollar hit a six-month low versus the safe-haven Swiss Franc.

“While stock markets crumbled, investors sought shelter in secure government bonds, and for a change not in the US dollar, which normally acts as the go-to currency during times of heightened uncertainty. Instead, the euro, yen, and especially the Swiss franc have served as safe havens, while the US dollar weakened broadly. The narrative driving the US dollar lower is one of reduced portfolio allocations to the US as the policy will bring most disruption to the US economy in the near term,” Mr Hansen said.

China on Friday retaliated with an additional 34 per cent tariffs on all imported US products starting April 10, matching the level of Mr Trump’s so-called reciprocal tariffs on Chinese goods.

Beijing's countermeasures, which also included export controls on rare earths, dealt a new blow to global stocks markets and led Mr Trump to describe China's reaction as the “wrong” move.

“China played it wrong, they panicked – the one thing they cannot afford to do!,” Mr Trump wrote in all-caps in a post on his Truth Social account.

JP Morgan Chase on Friday said it now expects 60 per cent chance of a global economic recession by year-end, up from 40 per cent risk earlier, it said in an economic research note titled “There will be blood.”

“If sustained, this year's ~22 percentage point tariff increases would be the largest US tax hike since 1968,” it said.

Tariff shocks will be magnified by “retaliation, supply chain disruption and a sentiment shock,” it added.

On Friday, US Federal Reserve Chair Jerome Powell said the central bank is not rushing to cut interest rates, despite the elevated uncertainty.

Nevertheless, he acknowledged the recent tariffs are far larger than expected, and they could have a larger impact on rising inflation and weakening growth.

The “baseline” 10 per cent US tariff on goods imported from around the world came into effect on Saturday.

Meanwhile in stock markets around the world, indexes fell steeply on Friday.

In Europe, France’s CAC 40 dropped 4.26 per cent, and Germany’s DAX lost 4.95 per cent.

The UK's FTSE 100 plummeted on Friday in its worst day of trading since the start of the pandemic. London’s top stock market index dropped 4.95 per cent, to close at 8,054.98 on Friday, the biggest single-day decline since March 2020 when the index lost more than 600 points in one day.

In Asia, Japan’s Nikkei 225 shed 2.75 per cent, Hong Kong’s Hang Seng lost 1.5 per cent and South Korea’s Kospi dropped 0.8 per cent.

Oil prices plunged to their lowest levels in more than three years on Friday.

Brent, the benchmark for two thirds of the world’s oil, was down 6.5 per cent at $65.58 a barrel at the market close on Friday. West Texas Intermediate, the gauge that tracks US crude, was 7.4 per cent lower at $61.99 a barrel.

On a weekly basis, Brent was down 10.9 per cent, its biggest weekly loss in percentage terms in a year and a half, while WTI posted its biggest drop in two years with a decline of 10.6 per cent.

In terms of commodities, even gold, a traditional safe haven asset, wasn’t exempted from the market chaos, slumping from a record high the metal reached earlier in the week.

“A tremor ripples through the world of numbers, a harbinger of a new era: The mercantilist pivot of the United States is shaking up the well-rehearsed choreography of global markets – a reordering of trade is taking shape,” Thomas Kolbe, an economist and author, said.