Stocks Post Biggest Weekly Losses Since 2020 as China, Europe Respond
The global financial system is reeling after a week of escalating trade tensions, sparked by President Donald Trump’s sweeping new tariff regime. What began as a policy pivot to pressure foreign competitors has rapidly devolved into a full-scale trade war, triggering the steepest stock market decline since the pandemic-driven meltdown of 2020.
Over the past five trading sessions, $6.6 trillion in global equity value was wiped out, with the Dow Jones Industrial Average (^DJI) losing over 2,000 points, a 7.86% drop, pushing it firmly into correction territory. The S&P 500 (^GSPC) and the Nasdaq Composite (^IXIC) followed suit, plunging 9.08% and 10.02%, respectively — the latter confirming entry into a bear market.
Markets were rattled by China’s 34% retaliatory tariffs, added in response to Trump’s aggressive trade barriers. The U.S. president, meanwhile, doubled down on his stance, vowing not to alter course as his administration raised tariffs to levels unseen in modern history.
Trump Declares Tariff Offensive: “America First, No Apologies”
In an unexpected announcement earlier this week, President Trump introduced a sweeping package of tariffs that included:
- 10% base tariff on all imports entering the United States
- 34% levy on Chinese goods, targeting electronics, machinery, and tech components
- 20% tariff on EU goods, with agriculture and auto exports taking a major hit
These measures were positioned as part of an “America First” industrial policy meant to restore domestic manufacturing dominance. But the timing, ahead of a fragile economic recovery, sparked immediate backlash from both allies and adversaries.
Trump defended his decision on social media from his Mar-a-Lago estate, insisting that the tariffs were necessary to protect American jobs and industries. “We are DONE being taken advantage of. The era of one-sided deals is OVER!” he posted on Truth Social.
China Hits Back Hard: 34% Tariff + Blacklisting of U.S. Firms
Within 48 hours, Beijing responded in force. The Chinese Ministry of Commerce announced:
- 34% tariff on all U.S. imports effective April 10
- Export controls on rare earth minerals, critical to semiconductor and EV production
- 11 U.S. companies added to China’s “unreliable entity” list
This includes firms tied to defense contracting and technology licensing. The move underscores China’s intent to go toe-to-toe with Washington, refusing to be cornered by unilateral policy shifts.
Markets interpreted this retaliation as the opening salvo of a drawn-out economic cold war.
Europe Weighs Response as Global Trade Order Teeters
Across the Atlantic, the European Union is preparing its counterpunch. French officials have called for a firm but calculated response, warning against escalation but refusing to accept Washington’s tariff ultimatum.
European Commission President Ursula von der Leyen hinted at targeted retaliatory tariffs and new trade alliances beyond the U.S. Meanwhile, Italy and Spain favor internal economic shields rather than tit-for-tat measures. Spain has already unveiled a €14.1 billion relief package for affected exporters.
Despite internal divisions, the EU’s top trade envoy is scheduled to hold emergency talks with U.S. counterparts in the coming days.
Wall Street Nosedives: Technical Breakdown Confirms Bearish Trend
The Dow Jones index’s collapse through key support zones has confirmed a technical breakdown. From a chartist’s view:
- 41,000 and 39,999.83 were breached with high volume
- 38,314.86 is the next major support zone
- RSI readings dropped to 23.55, signaling extreme oversold conditions
- MACD crossed bearish last Monday, forecasting this week’s volatility spike
The CBOE Volatility Index (VIX) surged to multi-year highs, reflecting investor fear and portfolio repositioning toward safe havens like gold, Treasuries, and the U.S. dollar.
Fed Under Pressure: Stagflation Risks Return
Federal Reserve Chair Jerome Powell addressed the media Friday, noting that the size and speed of Trump’s tariffs were “larger than expected” and pose risks to both inflation control and economic growth. He signaled that the Fed would not act immediately, stating that more data is needed — but left the door open to intervention.
Trump, however, pushed publicly for a rate cut, posting online: “CUT INTEREST RATES, JEROME, AND STOP PLAYING POLITICS!”
The standoff between fiscal and monetary policy is creating further uncertainty as investors and economists weigh the prospect of stagflation — a toxic mix of rising prices and slowing growth.
Recession Risks Surge: JP Morgan Raises Odds to 60%
Analysts across Wall Street have begun modeling in a global recession. JP Morgan revised its year-end recession probability to 60%, citing disrupted supply chains, lowered corporate earnings expectations, and weakened business confidence.
“This is not a trade spat. It’s a coordinated unraveling of global economic interdependence,” said Stephane Ekolo, strategist at Tradition in London. “The market is waking up to what that really means.”
What This Means for Investors
The sudden shock has left investors reeling and unsure how to position in an environment of economic decoupling. Key strategies emerging from the chaos include:
- Rotating out of cyclicals and into defensives (utilities, consumer staples)
- Hedging with volatility instruments and inverse ETFs
- Accumulating gold, silver, and Treasury bonds
- Watching for Fed signals on interest rate guidance
- Monitoring RSI and MACD for signs of oversold relief rallies
Outlook: Short Panic or Prolonged Pain?
While some traders expect a dead-cat bounce due to deeply oversold technicals, others warn this is the beginning of a prolonged bear phase. Much depends on whether diplomatic talks resume or devolve further into retaliatory escalation.
If President Trump holds the tariff line and global partners respond in kind, we could see structural repricing across risk assets for months to come. However, even a modest walk-back could spark a short-term relief rally.
Conclusion
The Trump tariffs have jolted the global economy into a new era of uncertainty. With key indices in freefall, central banks caught off guard, and geopolitical tensions rapidly escalating, markets are facing a critical inflection point.
China’s swift retaliation — a 34% tariff on U.S. goods and a blacklist of major American firms — has only intensified the pressure, signaling that this trade war could deepen before it de-escalates. The global financial system is now bracing for prolonged volatility, and investor sentiment remains fragile.
As markets reopen tomorrow, traders and policymakers alike will be watching closely for any new developments from Washington, Beijing, or Brussels. Whether this turns out to be a short-lived panic or the beginning of a sustained bear market remains to be seen — but one thing is clear: the next chapter in this economic showdown begins when the bell rings Monday morning.
