European shares close sharply lower after China slaps retaliatory tariffs on U.S.

European stock markets closed sharply lower on Friday, with investors still reeling from the scale of U.S. tariffs announced this week.

The regional Stoxx 600 index closed down 5%, marking its worst weekly-loss of the year, falling 8.3% compared to the previous week.

Banks shed 8.5% after Thursday’s 5.53% plunge. The sector is seen as vulnerable to a slowdown in growth or a recession, now viewed as a much stronger possibility both for the U.S. and the global economy. Bank of America strategists said Friday that banks were also “among the assets least advanced in pricing global macro trouble.”

China, which has been hit with a total tariff rate of 54% by the U.S., said Friday that it is retaliating with its own 34% tariff on all goods imported from the U.S. starting April 10.

In response, U.S. President Donald Trump said on Truth Social: “CHINA PLAYED IT WRONG, THEY PANICKED - THE ONE THING THEY CANNOT AFFORD TO DO!” 

The Stoxx 600 closed 2.57% lower on Thursday, as the world digested the steep duties slapped Trump on more than 180 countries, bringing fears of a global trade war and a U.S. recession to a boiling point.

Among the hardest-hit sectors on Thursday was retail, with the Stoxx Luxury 10 index down 5.2% in its worst session for nearly four years. Shares of shipping giants Maersk and Hapag-Lloyd, bellwethers for the health of the global economy, both fell more than 9%.

The sweeping tariffs were particularly severe on export-reliant, developing economies in Asia which produce garments and other consumer goods for the rest of the world. Trump’s 25% tariffs on imported vehicles to the U.S. also took effect this week, joining his duties on steel and aluminum.

The euro saw strong gains against the U.S. dollar on the news, hitting a six-month high, though it traded flat on Friday.