Dow Plunges 2,000 Points as China Retaliates Against U.S. Tariffs—Bonds Surge Amid Market Turmoil

Wall Street was rocked on Friday as escalating trade tensions between the U.S. and China triggered a massive market selloff. The Dow Jones Industrial Average plunged nearly 2,000 points, while the Nasdaq officially entered bear-market territory, signaling a 20% drop from its peak.

China’s latest move—a 34% tariff on all U.S. imports, set to take effect next Thursday—was in direct response to President Trump's aggressive tariff policy. The announcement dashed any remaining hopes for a quick resolution to the trade standoff, sparking fears of a prolonged global economic slowdown.

Market Meltdown: Investors Brace for More Pain

The stock market rout was swift and severe:

• The Nasdaq tumbled over 4%, erasing years of tech-sector gains.
• The S&P 500 saw fewer than two dozen stocks rise, while more than two dozen fell by 10% or more.
• The total market loss from this week’s tariff-driven selloff topped $6 trillion—a historic decline.

Fed Chair Jerome Powell warned that higher inflation and slower growth could last longer than initially expected, fueling further investor anxiety. JPMorgan analysts responded by increasing their odds of a global recession to 60%.

Trump and Lawmakers React

Despite the market turmoil, Trump remained defiant, calling it a “great time to get rich” and claiming China had “panicked”. Meanwhile, Secretary of State Marco Rubio acknowledged the crash but insisted that global economies would adapt.

Even a surprisingly strong jobs report—showing 228,000 new jobs added last month—failed to boost investor confidence.

A Flight to Safety: Bonds and Oil Prices React

As stock markets crumbled, investors rushed to safer assets:

• U.S. Treasury yields fell sharply below 4%, as bond prices soared.
• Global bonds, including those from Japan, Germany, and the U.K., also rallied.
• Oil prices slid to $62 per barrel, nearing their lowest levels since 2021.

While the U.S. dollar rebounded slightly, it remains near its weakest point of the year.

What’s Next? A Global Economic Crossroads

With markets on edge, investors are preparing for more turbulence. Trump’s promise of additional tariffs on pharmaceuticals and microchips could deepen the crisis, while China’s response remains uncertain.

For now, Wall Street is left navigating an unprecedented trade war—and the road ahead looks anything but smooth.

News Source: The Wall Street Journal