Stocks Plunge Amid Escalating Trade War, Fanning Recession Fears

Stocks tumbled on Friday, spurred by the onset of an intense trade war due to President Trump’s expansive tariffs. Wall Street’s strategists had already expressed their greatest concerns, speculating about the depths to which the S&P 500 might plummet by 2025. Following a $2.5 trillion decline in the markets on Thursday, experts cautioned that stock indexes could dip further if the trade conflict intensified. Come Friday morning, those concerns were realized.

The pre-market hours saw an acceleration in stock declines after China announced it would levy additional tariffs of 34% on all US imports starting April 10. This move mirrored the 34% increase in duties President Trump had introduced on Wednesday.

By 11 a.m. ET, significant stock indexes felt the impact: The Dow Jones Industrial Average fell 3.5%, or roughly 1,400 points, edging closer to correction territory. Meanwhile, the S&P 500 diminished by approximately 3.8%, putting it on track for its worst weekly performance since 2020. Additionally, the tech-centric Nasdaq Composite suffered a 4.2% drop.

Friday’s downturn prolonged a $2.5 trillion market dive as investors processed President Trump’s launch of the most assertive tariff initiative in decades. “If high tariff rates are maintained, negotiations are prolonged, and further actions are undertaken with major trade partners, the likelihood of a recession — our worst-case scenario — could significantly increase,” noted Mike Wilson, Morgan Stanley’s chief investment officer, in a client note on Thursday night. Wilson’s bleak prediction suggests the S&P 500 may fall to 4,600, a level last seen in December 2023.

The market’s recent fluctuations have already prompted some analysts to lose faith in stocks’ potential resurgence post-crash. Before China’s retaliatory tariffs were announced, RBC Capital Markets’ head of US equity strategy, Lori Calvasina, reduced her year-end target for the S&P 500 to 5,550 from a previous estimate of 6,200.

“Our former bear case scenario for this year has evolved into our new base case,” Calvasina stated.

As of Friday morning, the administration shows no signs of retreating from its staunch tariff approach. In a Truth Social post, Trump proclaimed, “MY POLICIES WILL NEVER CHANGE. THIS IS A GREAT TIME TO GET RICH, RICHER THAN EVER BEFORE!!!”

Currently, with the administration firmly holding its position and other trade partners responding with countermeasures rather than seeking dialogue, many on Wall Street do not foresee a swift resolution to the tariff disputes.