By Nathaniel Meyersohn

(CNN Money) -- President Trump says trade wars are good. Wall Street disagrees.

The Dow dropped more than 350 points on Friday after losing 420 points on Thursday. The Nasdaq and the S&P 500 both sank 1%.

The sell-off began after Trump announced that his administration would impose a 25% tariff on steel imports and a 10% tariff on aluminum. Trump has not said whether some countries would be excluded from the tariffs.

For the market, "this really could be something new and worse than we have seen so far," said Brad McMillan, chief investment officer at Commonwealth Financial Network.

Trump's announcement caught investors off guard and raised fears about a tit-for-tat retaliation from China and other major US trading partners.

Top American partners, including Canada, Germany, the European Union and Australia, all denounced the move. The World Trade Organization is "clearly concerned," director general Roberto Azevedo said. "The potential for escalation is real."

On Friday, Trump elevated concerns about a full-blown trade fight even further by tweeting that "trade wars are good, and easy to win." That helped bring down stocks for the second day in a row.

"Markets hate uncertainty and we still don't know exactly who and by how much these tariffs will impact trade," said Ryan Detrick, chief senior market strategist at LPL Financial.

Corporate America has warned that tariffs will harm the economy and the market.

Costs could soar for American companies that rely heavily on aluminum and steel produced overseas, such as auto and plane manufacturers and construction. Imports make up about a third of the steel American businesses use every year, and more than 90% of aluminum used here.

If the tariffs bring more expensive steel and aluminum, companies that rely on those materials may pass some of those costs to consumers. That raises the possibility inflation will creep up.

Fears about inflation and rising bond yields caused a surge in volatility last month, including two 1,000-point plunges, as the Dow suffered its biggest losses in two years.

On the other hand, McMillan said, if corporations decide to eat most of those higher costs, their profit will take a hit, hurting their stock prices.

Shares of Boeing dropped 3% on Friday. General Motors and Ford slipped. And Caterpillar lost 2%.

The tariffs caused yields on U.S. bonds to fall on Thursday as investors sought a haven from volatile stocks. Yields and prices move in opposite directions. The 10-year Treasury was back up slightly Friday, to 2.83%.

Domestic steel and aluminum manufactures are the winners from Trump's tariff announcement.

U.S. Steel and AK Steel soared 6% and 10%, respectively, on Thursday. Century Aluminum spiked 7% Thursday.

All three gave back some of those gains on Friday. McMillan attributed their losses to investors not reading too much into Trump's tweets.

"This has the potential to get worse, but there's a long way to go before we have a trade war," he said. "What Trump says and what he does are often two different things."

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