New York (CNN) — US stocks opened sharply lower Friday after China retaliated against the United States for President Donald Trump’s tariffs in a tit-for-tat that escalates a global trade war.

The Dow fell 1,000 points, or 2.5%, and the broader S&P 500 was 2.6% lower. The tech-heavy Nasdaq was 3% lower and flirting with bear-market territory — a decline of 20% from its peak in December.

Investors had been fearful that a dramatic escalation of the trade war could plunge the US and global economies into a recession. JPMorgan analysts said Thursday that America’s economy and the broader world economy both had a 60% chance of sinking into a recession this year. The analysts also said odds of a recession would rise if countries began to retaliate against the United States — and China did so Friday. Retaliation raises the risk of further escalation and could diminish hopes for negotiation.

“Markets may actually be underreacting, especially if these rates turn out to be final, given the potential knock-on effects to global consumption and trade,” said Matt Burdett, head of equities at Thornburg Investment Management. “The tariffs have injected a level of uncertainty and volatility we haven’t seen since the early days of the pandemic.”

Investors Friday morning wrestled with tariff anxiety while also digesting fresh data that showed stronger-than-expected job growth in March. The US economy added 228,000 jobs in March, a significant increase from February’s revised gains of 117,000, according to Bureau of Labor Statistics data released Friday.

While job growth beat expectations, tariff angst continues to drive market sentiment.

“Unfortunately, the market is no longer focused on the jobs market and focused squarely on tariffs and trade wars as the US plays chicken with the rest of the world, potentially beginning a downward spiral into a worldwide recession,” said Chris Zaccarelli, chief investment officer at Northlight Asset Management.

Traders ditched risky stocks, especially tech companies whose products are manufactured overseas and could soon be subject to enormous tariffs. Apple (AAPL), which tumbled more than 9% Thursday, was down another 5% Friday morning. Amazon (AMZN) was 7% lower.

As stock futures tumbled ahead of the opening bell, Trump posted on social media, “To the many investors coming into the United States and investing massive amounts of money, my policies will never change. This is a great time to get rich, richer than ever before!!!”

And as investors sold stocks, they poured money into traditional safe havens, including government bonds and gold.

The 10-year Treasury yield, which briefly fell below 4% Thursday for the first time since October, fell firmly below 4% Friday as investors bought bonds to insulate themselves from a potential economic downturn. Bond prices and yields trade in opposite directions.

Gold prices surged above $3,130 a troy ounce, setting another record. But investors ditched other commodities, including oil, out of fear that the trade war could send the global economy into a recession. US oil, which plunged nearly 7% Thursday, tumbled another 9% below $62 a barrel. Brent oil futures, the global benchmark, fell 8%.

China retaliates against Trump’s tariffs

China announced sweeping 34% tariffs on all US goods starting April 10, a major escalation of a trade war that has been raging for years between the world’s two largest economies. But the tit-for-tat tariff escalation kicked into high gear after Trump took office for the second time in January.

Trump in February placed an additional 10% tariff on all Chinese goods imported to the US and doubled that rate to 20% in March. On Wednesday, Trump announced that tariffs on China would rise to 54%. That’s on top of existing import taxes, which he and former President Joe Biden already had in place on the country. So the effective tariff rate America imposes on Chinese goods will be well above 54% starting April 9.

Markets have been on edge: The Russell 2000, which tracks smaller companies, entered a bear market Thursday. Stocks tumbled all over the world Friday: European and UK stocks were down more than 3%, on pace for their worst performance in years.

On Thursday, the Dow fell more than 1,600 points, or nearly 4%. The S&P 500 fell nearly 5% and the Nasdaq plunged nearly 6%. Each of the three major US indexes recorded its worst performance in about five years, since the pandemic.

Thursday’s plunge erased $2.5 trillion in market value from the US stock market.

“This is just the tip of the spear. Next it’s going to be retaliation from the EU and other nations. Banks, airlines and other service sector firms are going to get targeted,” said RSM’s Joe Brusuelas. “The Chinese are calling Trump’s bluff.”

UBS on Friday lowered its year-end target for the S&P to 5,800 from 6,400 and said the US economy could enter recession in the near-term due to the impact of Trump’s tariffs.

“In the near term, we believe the effective tariff rates could be higher still, and without President Trump taking active steps to reduce tariffs over the next three to six months, we are likely to enter a downside scenario, including a meaningful US recession and lower equity markets,” said Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management, in a note Friday.

Negotiations or more tariffs?

Trump said Thursday after the market close that he was open to negotiation on trade. He cited TikTok as an example, hoping China would agree to a sale of the popular social media app to a potential US buyer in exchange for lower tariffs.

“Every country has called us. That’s the beauty of what we do, we put ourselves in the driver’s seat,” Trump told reporters aboard Air Force One Thursday. “As long as they are giving us something that’s good. For instance, with TikTok as an example, we have a situation with TikTok where China will probably say, ‘We’ll approve a deal, but will you do something on the tariffs?’ The tariffs give us great power to negotiate. They always have.”

Some countries say they’re in active negotiations with the United States to lower the tariff barriers Trump announced this week. The United Kingdom, for example, said it is in talks with the United States to strike an economic agreement, British Foreign Minister David Lammy said on Friday.

But other countries chose to retaliate. Canada on Thursday announced retaliatory tariffs on some US-made cars.

France’s finance minister said the European Union was not considering reciprocal tariffs to respond to the Trump administration’s tariffs, because they could hurt European consumers, but the EU could target individual US companies, Eric Lombard said in an interview Friday with CNN affiliate BFMTV. The New York Times on Thursday reported the EU was considering penalties against Tesla.

Trump on Thursday dismissed the massive declines in the stock market, saying it’s “to be expected” and that the economy is in a “transition period.” He called the economy a “sick patient.”

Markets have more to digest on Friday. Federal Reserve Chair Jerome Powell is set to hold a discussion later Friday morning at which he will undoubtedly be asked about markets and the economy in the wake of Trump’s tariff announcement.

This is a developing story and will be updated.

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