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A global sell-off shook markets this week, marking the worst losses since the COVID-19 crisis in 2020. Fears of a prolonged trade war between the U.S. and China deepened after President Trump’s announcement of steep import taxes. The S&P 500 plummeted nearly 6%, while all major U.S. indexes fell by over 5%. International markets, including the FTSE 100 in the UK, saw sharp declines, triggering widespread panic. Despite the turmoil, Trump remained steadfast, urging investors to “hang tough” and downplaying the severity of the situation.

Trade Dispute Escalates Into Global Showdown

In what many experts consider the most significant tax increase in the U.S. since 1968, Trump’s 10% import tax on products from key trade partners like China, the EU, and Vietnam has sent shockwaves through global markets. This move is expected to lead to shrinking trade volumes and possible recessions across various nations. By Friday, China retaliated by imposing a 34% tariff on American goods and restricting exports of key minerals. Beijing has also blacklisted several U.S. firms, accusing Trump of breaking trade rules and “bullying” China.

The European Union has responded cautiously, though EU trade commissioner Maroš Šefčovič held a frank two-hour discussion with U.S. officials. He called for a “fresh approach” to trade while expressing the EU’s willingness to both negotiate and defend against further tariffs.

Markets Stagger as Uncertainty Deepens

Trump’s aggressive trade stance is in line with his election promises but has far exceeded expert predictions. The broad market impact has led to the steepest weekly drop since the initial COVID-19 crisis, as investors struggle to navigate the uncertainty. Apple and Nike, two companies highly dependent on Asian suppliers, initially led the downturn. By the end of the week, even sectors less tied to international trade, such as healthcare and utilities, experienced significant losses.

Mike Dickson, an expert at Horizon Investments, described the mood as “sour,” warning that the long-term consequences of these tariff increases could be severe. JP Morgan increased the likelihood of a global recession to 60%, a notable rise from its earlier 40% prediction. The bank also projected a two-percentage-point drop in U.S. economic growth for the year due to the tariff shocks.

Ripple Effects Hit Businesses and Industries Worldwide

Federal Reserve Chairman Jerome Powell reassured the public that the U.S. economy remains solid, citing strong job growth in March. However, Powell acknowledged the growing uncertainty and predicted slower economic growth alongside higher consumer prices. Small business owner Pat Muscaritolo in New Jersey expressed concern about the rising costs of appliances, predicting a 30–40% increase in prices for items like refrigerators. He may be forced to close his store after 40 years of operation.

Retailers such as Nike saw a slight rebound on hopes of a resolution, especially after Trump praised his recent call with Vietnam’s leader. Meanwhile, Cambodia reached out to the U.S., proposing tariff cuts and offering to begin trade talks. However, sentiment remains bleak, particularly for companies with substantial ties to China.

Apple shares dropped more than 7% by Friday, erasing 15% of its market value since Wednesday. The decline reflects growing concerns about supply chain disruptions and potential retaliatory tariffs.

Political Reactions and Concerns

Even loyal Republican Senator Ted Cruz warned of the “enormous risks” involved in Trump’s trade strategy. While acknowledging the potential long-term benefits, Cruz expressed fears about American goods facing widespread retaliatory tariffs in the coming months. The global repercussions are already being felt in places as far afield as the Falkland Islands. Janet Robertson of Consolidated Fishing Limited, a key player in the Falklands’ economy, voiced concerns over a new 42% export tax targeting toothfish, a crucial export for the region. While no drastic decisions have been made yet, the industry’s future remains uncertain.

Navigating Uncertainty

The global market turmoil caused by escalating trade tensions between the U.S. and China serves as a stark reminder of the fragile nature of international trade. While President Trump insists that the U.S. economy is strong, experts and business owners alike are grappling with the short- and long-term effects of the ongoing trade dispute. As the situation develops, the focus will likely shift to how quickly governments can negotiate a resolution that prevents further economic fallout.