A week of turbulence unleashed by US President Donald Trump's tariffs showed little sign of easing on Friday, with financial markets again whipsawing and foreign leaders grappling with how to respond to a dismantling of the world trade order.
A brief reprieve for battered stocks seen after Trump decided to pause duties for dozens of countries for 90 days quickly dissipated, as attention returned to his escalating trade war with China that has fueled global recession fears.
US Treasury Secretary Scott Bessent tried to assuage sceptics by telling a cabinet meeting on Thursday that more than 75 countries wanted to start trade negotiations. Trump himself expressed hope of a deal with China, the world's No.2 economy.
But the uncertainty in the meantime extended some of the most volatile trading since the early days of the COVID-19 pandemic.
The S&P 500 index ended 3.5% lower on Thursday and is now down about 15% from its all-time peak in February.
Asian indices mostly followed Wall Street lower on Friday with Japan's Nikkei down 4%, though markets in Taiwan and Hong Kong turned positive and European stocks were set to open slightly firmer.
A sell-off in government bonds - which caught Trump's attention before Wednesday's pause - picked up pace on Friday with US long-term borrowing costs set for their biggest weekly increase since 1982. Gold, a safe haven for investors in times of crisis, scaled a record high.
"Recession risk is much, much higher now than it was a couple weeks ago," said Adam Hetts, global head of multi-asset at investment fund Janus Henderson.
Bessent on Thursday shrugged off the renewed market turmoil and said striking deals with other countries would bring certainty.
The US and Vietnam have agreed to begin formal trade talks, the White House said. The Southeast Asian manufacturing hub is prepared to crack down on Chinese goods being shipped to the United States via its territory in the hope of avoiding tariffs, Reuters exclusively reported on Friday.
Japanese Prime Minister Shigeru Ishiba, meanwhile, has set up a trade task force that hopes to visit Washington next week. Taiwan said it also expects to be included in the first batch of trading partners to hold talks with Washington.
CHINA DEAL?
As Trump suddenly paused his 'reciprocal' tariffs on other countries hours after they came into effect earlier this week, he ratcheted up duties on Chinese imports as punishment for Beijing's initial move to retaliate.
Trump has now imposed new tariffs on Chinese goods of 145% since taking office, a White House official said.
Chinese officials have been canvassing other trading partners about how to deal with the US tariffs, most recently talking to counterparts in Spain, Saudi Arabia and South Africa.
Trump told reporters at the White House he thought the United States could make a deal with China, but he reiterated his argument that Beijing had "really taken advantage" of the US for a long time.
"I'm sure that we'll be able to get along very well," Trump said, adding that he respected Chinese President Xi Jinping. "In a true sense he's been a friend of mine for a long period of time, and I think that we'll end up working out something that's very good for both countries."
China, which has rejected what it called threats and blackmail from Washington, restricted imports of Hollywood films, targeting one of the most high-profile American exports.
The US tariff pause also does not apply to duties paid by Canada and Mexico, whose goods are still subject to 25% fentanyl-related tariffs unless they comply with the US-Mexico-Canada trade agreement's rules of origin.
With trade hostilities persisting among the top three US trade partners, Goldman Sachs estimates the probability of a recession at 45%.
Even with the rollback, the overall average import duty rate imposed by the US is the highest in more than a century, according to Yale University researchers.
The pause also did little to soothe business leaders' worries about the fallout from Trump's trade war and its chaotic implementation: soaring costs, falling orders and snarled supply chains.
One reprieve came, however, when the European Union said on Thursday it would pause its first counter-tariffs.
The EU had been due to launch counter-tariffs on about 21 billion euros ($23 billion) of US imports next Tuesday in response to Trump's 25% tariffs on steel and aluminium. It is still assessing how to respond to US car tariffs and the broader 10% levies that remain in place.
Finance ministers from the 27-country bloc will brainstorm on Friday how to use the pause to get a trade deal with Washington and how to coordinate their efforts to handle tariffs if they do not.
European authorities estimate the impact of the US tariffs its economy would total 0.5% to 1.0% of GDP. Given the EU economy as a whole is forecast to grow 0.9% this year, according to the European Central Bank, the US tariffs could tip the EU into recession.
