Stocks Erase 12 Months of Gains in Brutal Tariff Selloff

Stocks plunged in the United States and around the globe Friday after China imposed 34% tariffs on all US goods in retaliation for President Donald Trump’s tariffs on the country. Government bond yields fell sharply as investors sought safe-haven assets for a second day amid the spiraling trade war.

The Morningstar US Market Index closed down 5.91% on Friday afternoon, after dropping more than 5% on Thursday. By this measure, stocks have fallen by more than 10% since Thursday’s open and more than 17% since their February peak. Losses of 20% or more would constitute a bear market. After Friday’s close, stocks had wiped out all their gains from the past twelve months.

The S&P 500 benchmark was 6% lower on Friday, while the tech-heavy Nasdaq dropped 5.8%, hitting bear-market territory for that index.

With tariffs expected to damage economic growth traders have ratcheted up their bets that the Federal Reserve will cut interest rates at its May meeting to support the economy. They now see a roughly 30% chance of a cut next month, up from 22% on Thursday, according to the CME FedWatch tool.

In an appearance on Friday, Fed Chair Jerome Powell signaled that the Fed is watching risks to inflation and the economy but played down any urgency around interest rate cuts. “It feels like we don’t need to be in a hurry,” he says. “We’re going to have to wait and see how this plays out before we start to make adjustments.”

Solid March employment data released Friday morning did little to reassure markets.

Large Cap Stocks Extend Heavy Losses

This was the market’s worst week since March 20, 2020, when the covid-19 pandemic brought the global economy to a standstill. After two years of supercharged gains in 2023 and 2024, stocks floundered in the first quarter of 2025, amid tariff threats and mounting signs of an economic slowdown.

US mega-cap stocks were lower across the board on Friday, with Nvidia NVDA down 7.5%, Apple AAPL down 7.3%, and Tesla TSLA down 10.4%.

Large-cap growth stocks saw the worst losses within the Morningstar Style Box, falling 7% on the day, and every category was deep in the red on Friday afternoon along with all 11 stock sectors.

Bank stocks were among the hardest hit, with some major names posting losses approaching 20%. The $2 billion SPDR S&P Bank ETF KBE fell more than 14% over Thursday and Friday.

Energy also struggled and was the worst performing sector on Friday with losses of more than 9%. The recent drop in oil prices, driven by tariff fears ahead of the announcement, contributed to that decline.

Consumer defensive stocks, which were the sole sector to hold on Thursday, were down 4.2% by Friday afternoon but remained the best performing sector overall. The downside was more limited as investors sought safe harbor in companies less exposed to international trade, like Target TGT, Walmart WMT, Mondelez MDLZ, and General Mills GIS.

Bond Yields Tumble Amid Flight to Safety

Government bond yields across the globe have fallen further on Friday as prices have increased, since investors looking for safe assets amid the selloff have been boosting demand.

The US 10-year Treasury yield fell below 4%, its lowest level since the beginning of 2024. It was hovering at 4.2% before the tariffs were announced.

The US Dollar rebounded slightly on Friday, but it remains sharply lower against a basket of other currencies. Oil prices also dropped dramatically, with West Texas Intermediate crude prices—a benchmark for American oil prices—hovering near $62 a barrel on Friday afternoon.

European Stocks Fall

The Morningstar Europe Index fell more than 4% Friday, dwarfing the previous session’s declines, with banks and cyclical industries falling the most. Societe Generale GLE fell 10.5%, Banco de Sabadell SAB fell 11%, Deutsche Bank DBK lost 9%, UniCredit UCG lost 9.6%, and Barclays BARC fell about 9.1%.

For Michael Field, chief European market strategist at Morningstar, China’s tariffs will have a significant impact: “That China is the first nation to retaliate after the ‘Liberation Day’ tariffs is no surprise, given it was the target of some of the harshest US measures. This could be a stroke of genius, given that the main US export to China is crops and seeds—a low-margin business that will be devastated by the new measure, putting further pressure on the US administration to come to the table."

Field continues: “For Europe, this move has positives and negatives. Positive in that it now allows the EU to announce retaliatory measures without being the first nation to do so, negative in that it simply inflames the growing global trade war, making things worse for companies here. Expect further announcements in the coming weeks. The worst is yet to come.”