Dow drops more than 2,200 points as Trump tariff rout deepens

Nasdaq enters bear market after China announces retaliatory tariffs

US markets continued to plummet on Friday, deepening Wall Street's sell-off as fears rise that President Donald Trump's trade war could imperil the world economy.

Wall Street continued its steep decline after China announced it would be imposing a 34 per cent tariff on all US imports, matching the same duty Mr Trump announced on Chinese goods earlier this week.

The Dow Jones Industrial Average dropped 2,231.07 points – or 5.50 per cent – as it slid into correction territory, losing more than 10 per cent of its value from its record high in December. The S&P 500, already in correction territory, fell a further 5.97 per cent.

Meanwhile, the Nasdaq Composite closed in bear market territory – or more than 20 per cent from its recent record high – after sliding 5.82 per cent. The small-cap Russell 2000, which entered bear market territory on Thursday, slid a further 4.16 per cent during Friday's session.

"Right now we're in this fog of trade war that no one wants to be in," said Art Hogan, chief market strategist at B Riley Wealth.

So-called Magnificent 7 members, whose performances dominated Wall Street's bull run since 2022, led Friday's losses.

Apple fell 7.29 per cent, adding to its weekly losses of more than 13.27 per cent. The iPhone maker's supply chain is likely to be tested by Mr Trump's duties.

Apple makes most of its iPhones in China. India and Vietnam, where Apple moved its production of iPads and AirPods to after Mr Trump's initial trade war in 2018, were hit with 46 and 26 per cent “reciprocal” tariffs on Wednesday.

Nvidia fell 7.49 per cent while Tesla slid 10.42 per cent.

The yield on the 10-year Treasury fell to 4.006 per cent, meanwhile, as investors snapped up government bonds to seek a safe haven.

Mr Trump's sweeping tariff announcement earlier this week has rattled investors, while enraging the country's trade partners which are implementing their own retaliatory measures.

That has led to rising fears of a weakening US economy, which could lead to a slowdown in the global economy. Taking a rare swipe at the US on Thursday, the International Monetary Fund urged the Trump administration to find a way to avoid further economic harm.

Mr Hogan said it remains uncertain how much damage Mr Trump's tariffs will do markets until it reaches a place where investors know what Mr Trump's endgame is and how the tariffs are resolved.

"Right now it's hard to see through the fog of trade war where this ends up," he said.

Fears of a global downturn are now leading investors to project an aggressive set of interest rate cuts from the Federal Reserve, anticipating the central bank will deliver as many as four quarter-point cuts this year.

But Fed Chairman Jerome Powell played down those expectations during an event in Arlington, Virginia, on Friday, where he said the central bank is not rushing to cut rates, despite the elevated uncertainty.

Nevertheless, he acknowledged the recent tariffs are far larger than expected, and they could have a larger impact on rising inflation and dampening growth.

“The size and duration of these effects remain uncertain. While tariffs are highly likely to generate at least a temporary rise in inflation, it is also possible that the effects could be more persistent,” he said.