Charles Schwab (SCHW) stock plummeted 5.57% in Friday's pre-market trading session, as the financial sector faced a broad selloff triggered by China's announcement of retaliatory tariffs on U.S. goods. The escalating trade tensions have raised concerns about potential economic slowdown and stagflation, putting significant pressure on asset managers and banks.

China's finance ministry declared it would impose additional tariffs of 34% on all U.S. goods starting April 10, in response to President Donald Trump's recent tariff measures. This news sent shockwaves through the financial markets, with major asset managers and banks experiencing significant pre-market declines. Charles Schwab, along with peers like Apollo Global Management, Blackstone, and BlackRock, saw their shares drop as investors weighed the potential impact of trade war fears and economic uncertainty on the financial services industry.

Adding to the downward pressure, Truist Securities cut its target price for Charles Schwab to $85 from $91, reflecting growing caution among analysts. The brokerage sector is particularly vulnerable to market downturns, as they could lead to reduced trading activity, lower use of margin loans, and decreased fees from assets under management. Analysts warn that if the equity market correction deepens, there is a risk to brokerage firms' earnings. The situation is further complicated by concerns of potential stagflation, as highlighted by BofA analysts, who noted that "after a strong finish to 2024, the escalating trade war and federal spending cuts have increased the risk of stagflation." As one of the nation's largest wealth-management companies, Charles Schwab's ability to attract new client money in this challenging environment will be closely monitored by investors as a key indicator of its growth potential.