Stocks on Wall Street closed lower Friday, ending the worst week for the S&P 500 in two years, as investors weighed a brewing trade war between China and the United States that could hobble an otherwise healthy global economy.
Markets in New York tumbled through the afternoon. The S&P 500 closed 2 percent lower, and the Dow Jones industrial average lost about 1.8 percent. The Nasdaq composite — hurt by falling share prices in a number of technology companies — lost about 2.4 percent.
Fears of a trade war — fueled by tariffs announced by President Donald Trump and in Beijing — caused markets worldwide to shudder.
Benchmark indexes in London, Paris and Frankfurt all dropped Friday. Losses in Asia were much greater. In Tokyo, major exporters like Toyota and Sony helped to lead a 4.5 percent drop in the key index. Shares in Shanghai closed down 3.4 percent. South Korean stocks fell 3.2 percent.
"This can turn ugly on a global scale very quickly," Robert Carnell, chief economist for the Dutch financial services group ING Asia, wrote in a note to clients.
Traders in particular have focused on the risks to the global economy from tit-for-tat restrictions announced by the United States and China, along with increasingly protectionist moves by Washington elsewhere, as well ? the United States has brought in tariffs on steel and aluminum, albeit with exemptions for key allies, and marginalized the World Trade Organization.
Europeans, in particular, took only small comfort from the Trump administration's decision to exempt the European Union from the steel and aluminum tariffs. Business managers and political leaders fear that Europe could be caught in the crossfire of a trade war between two economic superpowers.
The United States is Europe's largest trading partner, but European countries also have deep ties with China, which is one of the largest buyers of European cars and machinery, and a major source of investment in Europe. Shares of the German automakers BMW, Daimler and Volkswagen all declined Friday morning, reflecting the importance of the Chinese market to their sales.
And by securing an exemption from the tariffs, Europe could be perceived as taking sides with the United States against China, said Gabriel Felbermayr, an economist at the Ifo Institute, a research organization in Munich.
"Instead of a trade war with the United States, Europe now faces the threat of a trade war with China," Felbermayr said in a statement.
Deutsche Bank provided an example of how uncertainty caused by the Trump administration measures could cause chain reactions that would affect other industries.
On Thursday, Deutsche Bank sold shares in its DWS Asset Management unit on the stock exchange. But Friday, declines in global stocks pulled DWS shares below the initial public offering price. Shares of Deutsche Bank, which retained an 80 percent stake in DWS, then fell more than 4 percent before recovering slightly.
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U.S. markets fell Thursday, as Trump announced $60 billion worth of annual tariffs on Chinese imports. That appeared to be the opening salvo of a trade war, as Beijing announced its own retaliatory tariffs on more than 100 items, including U.S. pork and wine.
The trade measures against China were the latest demonstration of Trump's "America First" agenda, and they were announced a day before tariffs on global steel and aluminum imports were to come into force.
For Europeans, the reprieve announced by the Trump administration from the protectionist measures could be brief.
The exemptions will expire May 1 unless the allies are able to negotiate "satisfactory alternative means" to address what the administration calls the threat to national security resulting from the current U.S. levels of steel and aluminum imports. The exempted group also includes Canada, Mexico, Australia, Argentina, Brazil and South Korea.
In addition, the White House said it might impose import quotas to prevent too much foreign metal from flooding into the United States.
Tensions escalated Friday as Beijing responded to Washington with its own tariffs and a warning to "avoid damage to the broader picture of Chinese-U.S. cooperation."
Some U.S. businesses in China also voiced concern.
"Our members do not want to see a trade war," said Kenneth Jarrett, president of the U.S. Chamber of Commerce in Shanghai. "The stakes are too high and there would be no winner."
But he added that U.S. businesses in China wanted "fairer treatment and improved market access in China. The Chinese government has the ability to deliver against that reasonable expectation."