TOKYO (Kyodo) -- Having already dealt a heavy blow to global stock markets, fear over the downsides of U.S. tariff policies has left investors expecting the worst as President Donald Trump's trade war roils economies worldwide and creates short- and long-term uncertainty.

The benchmark Nikkei index slid 2.75 percent to 33,780.58 on Friday from the previous day as the market tried to get a grip on Trump's "reciprocal" tariff announcement, its design and its implications for companies with international operations.

"It is likely to take some time until the market digests (the tariffs') impact on the economy and corporate earnings," said Maki Sawada, a strategist at the Investment Content Department of Nomura Securities Co.

Citing retaliatory steps that could be taken by U.S. trading partners and possible expanded levies by Washington, Sawada said, "It may be difficult for the market to turn for the time being."

The Nikkei index, which was trading at around 40,000 at the beginning of this year, has already lost approximately 16 percent as Trump threatened and then imposed tariffs, disappointing investors who had banked on Trump's perceived sensitivity to stock market declines.

The damage was just as bad on Wall Street, with the Dow Jones Industrial Average nosediving 5.5 percent on Friday, following a 4 percent drop a day earlier, as China announced retaliatory measures in response to Trump's tariffs.

Since returning to the White House in January, Trump has introduced various types of duties, including an additional 25 percent tariff on cars produced outside the United States and 25 percent levies on all steel and aluminum imports.

He has targeted friend and foe alike, with allies and key trading partners such as Canada, Mexico and Japan not spared.

Under his latest measure, all countries are facing a baseline duty of 10 percent, with Japan being hit by a much higher rate of 24 percent.

Trump claimed that Tokyo imposes an average 46 percent duty on U.S. imports, taking nontariff measures, such as regulating the entry of U.S. cars sold in Japan, into consideration.

The calculation of the figure for Japan, and those for many other nations targeted in the trade salvo, has been widely questioned.

The president has also argued that Tokyo imposes a 700 percent tariff on rice, a level that Japan's farm minister Taku Eto described Thursday as "incomprehensible."

"We won't get that number if we do calculations in a logical manner," the minister said.

The return of Trump to office was perceived by the market as a net positive, given his expected pro-business and low-tax stances. However, the optimism that prevailed in the market before his inauguration has turned to wariness as reality has set in, brokers said.

"Sentiment among institutional and individual investors has deteriorated sharply, prompting them to react negatively to the stance of President Trump, who has been aggressively imposing tariffs at a relatively fast pace," said Asuka Sakamoto, senior economist at Mizuho Research & Technologies Ltd.

"Investors now realize that the economy could be hit harder than they had imagined," she said.

Reflecting such fears, investors have begun moving from equities to assets considered less risk-exposed, leading to the yen's strengthening against the dollar. This further dented export-related companies like automakers due to the prospect of lower overseas earnings when repatriated.

Bank shares have also been sold heavily amid concerns about deteriorating profit margins caused by lower interest rates.

On Friday, the yield on the benchmark 10-year Japanese government bond fell to 1.160 percent, its lowest level in about three months, as expectations that the Bank of Japan would tighten policy further in the near future faded.

BOJ chief Kazuo Ueda told a parliamentary committee that Trump's imposition of wide-ranging tariffs will "put downward pressure" on the Japanese and global economies, further contributing to fears that the United States and elsewhere could slide into recession.

"When there is a significant change in surrounding environments, the outlook for the economy and prices is likely to change accordingly," he said, fueling speculation that the central bank will forgo a rate hike at its next two-day policy meeting from April 30.

The outlook for tech shares that had been a main driving force behind the Nikkei index's rally last year has also darkened, as Nasdaq heavyweights have struggled to recover from a blow delivered in January by Chinese artificial intelligence startup DeepSeek.

After the release of DeepSeek's AI model, reportedly developed and operated at significantly lower cost than its U.S. rivals, caused shockwaves, doubts remain whether the tech giants can recoup their massive outlays on AI development and training, brokers said.

Amid mounting negative incentives, investors are focusing on how world leaders will react to the U.S. tariffs, as many countries now face the need to engage in talks with Washington, said Makoto Sengoku, senior equity market analyst at Tokai Tokyo Intelligence Laboratory Co.

"What is now needed are negotiations that would help minimize the adverse impact of the tariffs on the global economy," he said.

By Risako Nakanishi