New York: US stocks ended the week significantly lower as the trade war intensified after China retaliated to President Donald Trump's reciprocal tariffs that were announced earlier this week. China imposed a 34% additional tariff on all imports from the US, a move seen as a tit-for-tat against Trump's 34% reciprocal tariffs on China.
According to Anadolu Agency, the tariffs, set to go into effect next Thursday, will affect all US products imported to China, as stated by a Customs Tariff Commission of the State Council. The commission labeled the US' reciprocal tariffs as one-sided "bullying," asserting that the levies violate international trade rules and harm China's rights and interests.
In response to the counter-tariffs from China, Trump remarked that Beijing has "panicked" in its trade policy response to his administration's recent tariff actions. 'CHINA PLAYED IT WRONG, THEY PANICKED - THE ONE THING THEY CANNOT AFFORD TO DO!' Trump wrote on Truth Social.
Meanwhile, Fed Chair Jerome Powell commented that the tariffs were "larger than expected" and could lead to higher inflation and slower growth. He emphasized that the Federal Reserve would not rush decisions regarding monetary policy. "It is too soon to say what will be the appropriate path for monetary policy," Powell stated. "We will continue to carefully monitor the incoming data, the evolving outlook, and the balance of risks. We are well positioned to wait for greater clarity before considering any adjustments to our policy stance."
On the macroeconomic data side, the US added 228,000 jobs in March, surpassing the forecast of 137,000. However, the unemployment rate rose to 4.2%, higher than the estimated 4.1%.
The stock market experienced dramatic declines, with the Dow dropping 5.50%, or 2,231.07 points, to close the week at 38,314.86, marking its largest drop since June 2020 and entering correction territory. The S and P 500 slipped 5.97%, or 322.44 points, closing at 5,074.08, its biggest fall since March 2020, and is more than 17% off from its recent high. The Nasdaq fell 5.82%, or 962.82 points, to 15,587.79, pulling the index down 22% from its December record, thus entering a bear market.
The sharp two-day drop in indices resulted in losses exceeding $6 trillion, while nearly $10 trillion has been wiped from US markets since Trump's inauguration. The VIX Index, known as the 'fear index,' surged by 50.93% to 45.31.