Markets worldwide suffer worst week in years in wake of Trump trade war

MANHATTAN (CN) — President Donald Trump’s tariffs have caused equities markets around the world to implode, with U.S. indices losing trillions of dollars in value in two days.

On Thursday, following Trump’s tariff announcement the day before, markets suffered their worst day in five years. The damage compounded Friday, with the Dow losing 3,270 points for the week by the closing bell, the S&P decreasing 506 points, and the Nasdaq falling 1,735 points.

The volatility index, which is a good indicator of investors’ concerns and colloquially called Wall Street’s “fear index,” nearly doubled since the tariff announcement, rising to 41 points by Friday’s closing bell.

The latest carnage is just the most recent since Trump assumed office. Since Inauguration Day, markets have hemorrhaged value, with Dow Jones Industrial Average losing roughly 11%, while the S&P 500 has lost 15%, and the Nasdaq 21 %.

Even the better-than-expected jobs report on Friday, which in more normal times would have caused a bump in equities, did not help stanch the bleeding on Wall Street.

“On the surface, this appears to be a bullish number, but it is important to understand that this is backwards-looking data,” said Larry Tentarelli, chief technical strategist for the Blue Chip Daily Trent Report. The latest jobs report does not yet incorporate the more than 275,000 job cuts made by the Department of Government Efficiency.

“Markets are going to be much more concerned with incoming, future data, and our concern here is that the higher-than-expected tariffs are going to lead to a major slowdown in hiring and the labor market,” he said.

Comments by Federal Reserve Chair Jerome Powell on Friday were meant to calm investors, but they actually furthered the carnage by raising the specter of inflation.

“Looking ahead, higher tariffs will be working their way through out economy and are likely to raise inflation in coming quarters,” Powell said at a conference in Virginia. “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.”

Earlier in the week, manufacturing data by the Institute for Supply Management declined again and missed the consensus forecast of 49.5. This means manufacturing has slipped into contraction territory after a slight expansion in February.

“The manufacturing industry is reacting poorly to higher tariffs,” said Bill Adams, chief economist at Comerica Bank. “New orders are falling and businesses are ramping up activity to front-run tariffs, meaning that manufacturing will likely weaken further in coming months.”

ISM’s monthly services index also came in lower than predicted, falling to 50.8 compared with the 52.9 forecast. That index still shows expanding economic activity but ISM noted that “there has been a significant increase” in the number of respondents reporting cost increases due to tariffs.

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