In every corner of the financial markets, from stocks to bonds to commodities, investors are sending Donald Trump the same unmistakable message: The trade war he unleashed is threatening to set off a worldwide recession — and fast.
With China retaliating less than 48 hours after the US president rolled out his punitive tariffs, traders are pricing in what increasingly looks like a negative-feedback loop as Trump shows little indication he’s going to back down.
The grim signs continued to pile up on Friday, when even a significantly stronger-than-expected US jobs report did nothing to dispel the growing worries about the outlook for the global economy. Federal Reserve Chair Jerome Powell deepened those concerns, saying the shift in trade policy is likely to fan inflation and slow the pace of growth while making it clear the central bank is in no rush to ease policy.
That stock slide accelerated as US trading day wore on. By mid-afternoon, the S&P 500 Index was down by nearly 5.5%, putting it on pace for the steepest two-day slide since March 2020 and wiping out some $5 trillion of stock-market value.
Stocks in Italy, France, Switzerland and Germany have plunged 10% or more from their highs. Oil tumbled Friday by the most in nearly three years, before paring the drop, on speculation demand will slow. The cost to protect investment-grade debt against default surged by the most since the regional banking crisis of 2023. And government bonds rallied as investors rushed into havens.
“We are rapidly headed towards recession,” said Peter Tchir, head of macro strategies at Academy Securities. “The world was prepared for ‘reciprocal tariffs.’ Whatever the abomination that was launched at the Rose Garden was, it is a disaster — mostly for the US, but also for the global economy.”
The president’s decision Wednesday to slap tariffs on some 60 countries — including China and the European Union — marked a major pullback from the steady growth in cross-border trade that has powered the global economy for the last several decades. Trump’s go-it-alone approach has also put him at odds with virtually every country in the world, raising the stakes for the US, which relies on investors abroad to help absorb an ever-rising supply of its debt.
Since Trump unveiled his levies, Wall Street strategists and economists have been revising their forecasts, anticipating a shock that could upend a US economy that has surprised forecasters with its strength since the pandemic.
On Friday, traders ignored the type of news that would usually have set off a rally: The Labor Department’s figures showed hiring unexpectedly accelerated sharply last month, with 228,000 new jobs added to payrolls.
“US trade policy was structurally changed on massive scale Wednesday,” said Michael O’Rourke, chief market strategist at JonesTrading Institutional Services. “The jobs report is old news and useless to investors.”
The US stock selloff has sent the tech-heavy Nasdaq 100 down over 20% since mid-February. Even small-cap stocks, once seen as likely to benefit from Trump’s protectionism, have been hit as concerns about a recession shift to the fore. Wall Street’s fear gauge — the CBOE Volatility Index or the VIX — spiked, sending it toward to the highest closing level since 2020.
“When there is fear in the market, as the VIX is telling us, everything will sell off,” said Jay Woods, chief global strategist at Freedom Capital Markets. “It does feel like the sky is falling off. This is very different scenario right now because we are at the whim of Washington.”
Trump has downplayed the stock-market selloff, saying it will reverse as the benefits of his policies kick in, and showed little indication he intends to change course. On Friday morning, he reposted a video by a TikToker speculating that the rout was all part of a plan to redistribute wealth and drive down interest rates.
Later in the day, though, he showed some signs of concern by lashing out at Powell in a social media post, saying he should “stop playing politics” and cut interest rates immediately. Shares of companies that have large manufacturing operations in Vietnam, including Nike Inc. and Lululemon Athletica Inc., also jumped after Trump said Vietnam was willing to eliminate tariffs to avoid new US levies, fueling some optimism that particular rates may be negotiated downward.
Otherwise, sanguine voices were hard to find. JPMorgan Chase & Co. Chief Economist Bruce Kasman, for one, said he sees a 60% chance that US tariffs will push the global economy into a recession this year. His note bore the title: “There will be blood.”
Faced with a potential dropoff in demand, the price of oil has tumbled some 13% in just two days to around $62 a barrel, echoing a move seen during the pandemic. The rapid movements also whipsawed currencies, with the dollar plunging sharply Thursday, then regaining some of its lost ground.
As the stock selloff continued Friday, investors piled into Treasuries, one of the few safe spaces. That drove the yields on two-year notes down as much as 22 basis points to 3.46%, the lowest since 2022, before they erased almost all of the drop after Powell’s comments drove traders to dial back some of their rate-cut bets.
“We had significant shocks to financial markets,” said Daniel Ivascyn, group chief investment officer at Pacific Investment Management Co. “Anytime you have these big moves this quickly, there tends to be pain.”
Written by: Denitsa Tsekova, Esha Dey, Isabelle Lee, and Liz Capo McCormick — With assistance from Alex Longley, Jeran Wittenstein, Ryan Vlastelica, Ye Xie, Alice Gledhill, Phil Kuntz, and Elena Popina @Bloomberg
The post “Global Recession Fears Engulf Wall Street on Tariff Retaliation” first appeared on Bloomberg