A wide number of countries will be subject to a 10% baseline tariff , and amongst notable specific country rates, China will face an additional 34% levy on its goods, Japan imports will face a 24% tariff and 20% for the European Union. The new measures sparked concerns about stoking inflation and potential recession. In response Wall Street sold off heavily, losing $6.6tn over Thursday and Friday, the largest ever two-day pullback. For the week the S&P 500 fell 9.1% and the Dow Jones Industrial Average lost 7.9%. The tech-heavy Nasdaq Composite shed 10% and is now down more than 20% from its record high, entering a bear market.
Economic data for the week was mixed with ISM’s Manufacturing Purchasing Managers’ Index dropping into contraction in March. Meanwhile the usually hotly anticipated non-farm payrolls data, which was largely overshadowed by the tariff fall-out, came in stronger-than-expected. The heightened economic uncertainty prompted traders to up their bets over the number of interest rate cuts from the Federal Reserve this year. On Friday Fed chairman Jerome Powell noted that “uncertainty is high and downside risks have risen”. Investors looked for safety in government bonds, pushing yields lower. The 10-year Treasury yield fell below 4% for the first time since October and saw its biggest weekly decline since August.
European equity markets also tumbled in response to the tariffs. The pan-European STOXX 600 index experienced a 5.1% loss on Friday, its biggest daily drop since 2020. For the week the index lost 8.4% and is down almost 12% from its record high logged just a month earlier, entering correction territory. Germany’s DAX index also entered correction territory on Friday, down 8.1% for the week. Meanwhile European government bond yields were sharply lower. Markets also ramped up bets that the European Central Bank would action more rate cuts this year.
It was a similar story in Japan where the yield on Japanese government bonds declined, with the 10-year ending at 1.18%. This pressured Japanese bank stocks which were some of the steepest fallers of the week, as well as automakers remaining under pressure following the previous announcement of tariffs imposed on non-US autos. Japan’s Nikkei 225 shed 9%. Losses in China were less severe, although markets were closed on Friday. The Hang Seng index fell 2.5% while the Shanghai Composite lost just 0.3%. Beijing announced a 34% retaliatory tariff on Friday.
Earlier in the week gold had continued to climb to fresh highs however it later slipped and was down 1.3% for the week. With increased odds of a global slowdown oil prices plunged to their lowest levels in nearly four years. Brent crude lost 10% for the week.