U.S. companies experienced another challenging day in the stock market on Friday, largely due to China’s retaliatory tariffs in reaction to President Donald Trump’s trade measures, indicating a deepening trade conflict.
This development impacted multiple sectors, with the S&P 500 enduring its most significant one-day decline since the global economic downturn perpetuated by COVID-19 five years ago.
The Chinese Commerce Ministry announced a response strategy matching the U.S. 34% tariffs on Chinese imports by imposing an equivalent 34% duty on American imports starting from April 10.
Businesses that export to China, notably in sectors such as aerospace, agriculture, and heavy machinery, were hit particularly hard.
This followed a trend from Thursday, which saw major losses for banks, airlines, and tech companies, although some areas like retail, clothing, and dining faced less severe declines.
Notably, Nike managed to secure small gains despite the turmoil.
The widely recognized “Magnificent 7” stocks—representing Apple, Microsoft, Nvidia, Alphabet, Amazon, Meta, and Tesla—suffered combined losses in market value totaling around $1.8 trillion over the past two days.
Tariffs serve as indirect business taxes passed onto consumers. Consequently, rising product prices could lead consumers to cut back on discretionary spending.
Given that consumer spending constitutes approximately 70% of U.S. economic activity, reduced demand would likely result in decreased production, stalling economic growth, and potentially heralding a recession.
JPMorgan recently increased its recession probability estimate to 60%, rising from a prior 40%, acknowledged on Thursday.
On Friday, all three major U.S. stock indexes registered falls exceeding 5%.
Breakdowns of Significant Market Losses on Friday:
**Agriculture and Heavy Equipment:**
The U.S. exports a considerable volume of heavy machinery and oilseeds to China.
– Deere & Co. saw a 3.9% dip on Friday, following a 5% loss the previous day.
– Archer-Daniels-Midland dropped 8.9% after a 0.8% decline on Thursday.
– Caterpillar fell by 5.8%, on top of an 8.6% decrease the day before.
**Aerospace and Defense:**
Aerospace manufacturers heavily depend on Chinese markets. In retaliation, China imposed stricter export controls on rare earth materials crucial to tech, aerospace, and defense sectors.
– Boeing registered a 9.5% loss, after a 10.5% decline on Thursday.
– General Dynamics decreased by 7.3%, subsequent to a 2.3% loss.
**Airlines:**
While airlines anticipated robust profits this year, increased essential costs might dampen consumers’ travel plans.
– United Airlines decreased by 4.3%, following a 15.6% plunge the prior day.
– American Airlines experienced a 0.5% drop on Friday after a substantial 10.3% fall.
– Delta Air Lines mirrored this trend with a 3.8% decrease after a previous 10.7% dip.
**Technology Sector:**
Tech companies, reliant on foreign components or overseas manufacturing, face tariff implications when importing their products.
– Apple saw a 7.3% reduction on Friday, subsequent to a 9.3% loss on Thursday.
– HP was down 4.9% following a previous 14.7% decline.
– Dell endured a 7.3% drop after a substantial 19% fall the prior day.
– Nvidia decreased by 7.4% after bearing a 7.8% loss.
**Banking Sector:**
In a potential recession, there would be less inclination among households and businesses to borrow, reducing demand for financial services.
– Wells Fargo saw a 7.1% decrease on Friday, on top of Thursday’s 9.1% loss.
– Bank of America dropped by 7.6%, following an 11.1% fall.
– JPMorgan Chase faced an 8% loss after a 7% decline.
**Automotive Industry:**
Interestingly, automakers were not hit as hard as expected. The domestic sourcing of steel and aluminum mitigates direct tariff impacts.
– General Motors decreased by 3.7% following a 4.3% loss.
– Ford slightly increased by 0.4% on Friday, after a 6% dip.
– Tesla faced a significant 10.4% decrease on Friday, following a 5.5% fall.
– Stellantis dropped 4.8% after encountering a 9.4% loss.