The technology sector bore the brunt of the sell-off, with the Nasdaq Composite Index declining 5.9%, its steepest drop since March 2020. The Dow Jones Industrial Average also suffered, closing down 4%.
Asian markets mirrored Wall Street's turmoil. Japan's Nikkei 225 index fell 3.6% to 33,474.56, reaching its lowest level since August and recording a weekly loss nearing 10%. The broader Topix index declined 4.6% to 2,448.94, marking an 11% weekly drop—the steepest since March 2020. Japanese banking shares were particularly affected, with the banking index plunging 11% and on track for a record 20% weekly loss.
The newly imposed tariffs include a minimum 10% tax on all global imports, with higher rates on goods from countries such as China and European Union members, and up to 49% on products from smaller Asian nations. Investors fear these measures could lead to higher inflation and slower economic growth. UBS estimates a potential 2 percentage point drop in U.S. growth, with inflation reaching 5%.
European markets were not spared, with Germany's DAX slipping 0.7%. The dollar weakened slightly against the yen and euro, while bond yields dropped on expectations of Federal Reserve rate cuts. Oil prices and gold also fell, despite the latter's traditional safe-haven status.
In response to the escalating trade tensions, Bank of Japan Governor Kazuo Ueda stated that the central bank would evaluate the economic impact of the U.S. tariffs when formulating policy. Analysts expressed concerns that the trade war could trigger a global recession, with Japan particularly vulnerable due to its dependency on trade.
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Economy