Stocks plunge again as trade war intensifies

The rout in stock markets continued Friday as worries deepened about a global trade war, after China retaliated against President Donald Trump's sweeping tariffs with steep levies of its own on US goods.

The S&P 500 was set to open more than 3 per cent lower Friday, according to futures trading. On Thursday, the index posted its worst daily loss since 2020, plunging 4.8 per cent.

European and Asian indexes fell sharply for a second day as investors weighed the economic effects of Trump's tariffs. The Stoxx Europe 600 dropped more than 4 per cent, erasing its gains for the year. In Japan, the Nikkei 225 fell 2.8 per cent, matching a drop the day before.

The Chinese government said Friday that it would match Trump's plan for 34% tariffs on goods from China with its own 34 per cent tariff on imports from the United States. It also added 11 American companies to its list of "unreliable entities," essentially barring them from doing business in China or with Chinese companies.

The moves showed that Beijing has no intention of backing down in the trade war with Trump. Investors were already on edge because of the potential disruption that Trump's policies, including widespread deportations and layoffs of federal workers, could have on the economy.

His announcement Wednesday, which he called "Liberation Day," included a minimum tariff of 10 per cent on nearly all imports, causing markets to convulse as investors dumped stocks and sought safety in government bonds.

On Friday, the yield on 10-year Treasury bonds fell steeply by 0.16 percentage points to 3.88 per cent, the lowest since early October.

The severity of the stock market sell-off reflects how investors were taken by surprise by the scale of the tariffs. At the same time, Trump has said he is open to negotiating with countries, making it unclear how long tariffs will persist and making it harder to judge how companies might respond.

"Liberation day will not bring freedom from uncertainty," analysts at Goldman Sachs said in a note.

In Europe, bank stocks were hard hit, reflecting fears of tariffs hitting growth in a region already struggling because of weak exports and business investment. Bank of America said in a report Friday that its latest economic forecast implied that the benchmark pan-European stock index could fall another 10 per cent in the coming months. The "narrative has started to darken," the bank's analysts wrote.

Steep levies were imposed by Trump on many Southeast Asian countries -- including Vietnam, Indonesia, Cambodia -- that are critical to the supply chains of some of America's biggest brands. These countries also reprocess a lot of Chinese components for export to the United States, a popular way for companies to avoid longstanding US tariffs on goods coming straight from China.

The stock market in Vietnam, which faces a 46 per cent tariff, was down again Friday after plunging the prior day.

In South Korea, the Kospi Index fell 0.9 per cent Friday after dipping about the same amount the prior day. Trump put a 26 per cent tariff on imports from South Korea.

Stock markets in mainland China, Hong Kong and Taiwan were closed Friday for a local holiday.