Asian markets fell on Friday following a steep sell-off on Wall Street, triggered by the latest round of tariffs announced by Donald Trump, which dealt a fresh blow to the global economy on a scale not seen since the onset of the COVID-19 crisis.

Futures for U.S. equities and oil prices also moved lower.

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Japan’s Nikkei 225 dropped 2.6% to 33,818.18, while South Korea’s Kospi declined 0.8% to 2,467.14, as both nations moved toward talks with Trump’s administration to negotiate tariff reductions.

Australia’s S&P/ASX 200 retreated 1.9% to 7,713.60. Chinese markets remained closed due to a public holiday.

Trump introduced a base tariff of 10% on imports, with significantly higher rates imposed on goods from certain nations, including China and EU member states. UBS analysts estimated that the full scope of these tariffs—comparable to levels not seen in nearly a century—could slash U.S. economic growth by two percentage points this year and push inflation toward 5%.

Such a dramatic economic impact makes the likelihood of the tariffs being sustained seem “low,” according to Bhanu Baweja and other strategists at UBS.

Trump previously acknowledged tariffs might cause “a little disturbance” in the economy and financial markets, and on Thursday, he again downplayed their effects as he departed for Florida from the White House.

“The markets are going to boom, the stock is going to boom, and the country is going to boom,” he asserted.

On Thursday, the S&P 500 plunged 4.8% to 5,396.52—its worst single-day performance since the pandemic-induced crash of 2020. The Dow Jones Industrial Average slid 4% to 40,545.93, and the Nasdaq composite sank 6% to 16,550.61.

Markets across the board were hit by fears of a damaging combination of slowing economic growth and rising inflation driven by the tariffs.

From crude oil to Big Tech stocks and even the U.S. dollar, prices fell. Gold, which had recently reached record highs as a safe haven, also edged lower. Smaller U.S. firms were especially affected, with the Russell 2000 index diving 6.6%, pushing it more than 20% below its all-time high.

While investors were bracing for sweeping tariffs, Trump’s announcement still delivered what Mary Ann Bartels, CIO at Sanctuary Wealth, called “the worst case scenario.”

For some time, Wall Street had assumed Trump would use tariffs mainly as leverage in trade negotiations, rather than implement them as permanent policy. But his remarks on reshoring manufacturing jobs suggest a more ideological commitment, rather than a tactical manoeuvre. Achieving such a shift could take years.

If the tariffs are fully implemented, stock values may need to fall significantly more than the current 10% from their peak to factor in a potential recession and the decline in corporate earnings that could result. As of now, the S&P 500 is down 11.8% from its February record.

“Markets may still be underestimating the full impact, especially if these rates turn out to be final,” said Sean Sun, a portfolio manager at Thornburg Investment Management, though he suggested the announcement might still represent an opening move.

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When asked about the market reaction as he headed to his Florida golf club, Trump remained optimistic.

“I think it’s going very well,” he said. “We’re conducting a sort of economic surgery, like a major operation. This is exactly how I said it would go.”

One variable in the situation is the Federal Reserve, which could lower interest rates to stimulate the economy. The Fed had been cutting rates late last year but paused in 2025. Lower rates can help businesses and consumers by making borrowing cheaper.

Treasury yields plunged amid growing expectations of rate cuts and broader concerns about the U.S. economy. The 10-year Treasury yield fell sharply to 4.04% from 4.20% on Wednesday, down from around 4.80% in January—a significant move in the bond market.

However, the Fed’s flexibility may be limited. While lower rates can spur economic activity, they can also drive inflation higher—something tariffs are already intensifying. American consumers are bracing for higher costs across the board.

Despite the turmoil, recent data shows the U.S. economy is still expanding. A report released Thursday revealed a decline in jobless claims, surprising economists who had expected a rise in unemployment. A strong labour market has been key in preventing a recession so far.

Another report showed growth in the U.S. services sector—encompassing transportation, finance, and other areas—though the pace was slower than forecast, and business sentiment was mixed.

Worries over slowing economic momentum and stubborn inflation drove declines in a wide array of stocks, with four out of five S&P 500 companies finishing lower.

Best Buy fell 17.8%, hurt by concerns over its global supply chain. United Airlines dropped 15.6%, as fears over the economy may reduce both business and leisure travel. Target declined 10.9%, amid worries that consumers already grappling with inflation might cut back further.

In early Friday trading, the U.S. dollar strengthened slightly to 146.05 yen from 145.93 yen. The euro also edged up, rising to $1.1068 from $1.1052.