The major domestic equity indexes moved sharply higher on Friday, with the S&P 500 and the Nasdaq hitting their highest levels in two weeks, as strong jobs growth blunted the impact of an escalating U.S.-China trade dispute.

Nonfarm payrolls increased by 213,000 jobs last month, the U.S. Labor Department said, topping expectations of 195,000, while the unemployment rate rose from an 18-year low to 4 percent and average hourly earnings rose 0.2 percent.

The moderate wage growth allayed fears of a strong buildup in inflation pressures and boosted optimism that the Federal Reserve would stay on a path of gradual interest rate increases.

The positive employment report heightened trade tensions between the United States and China. The two countries slapped tit-for-tat tariffs on $34 billion worth of each other’s imports on Friday. Beijing accused the White House of triggering the “largest-scale trade war.”

Some investors were encouraged that the value of goods targeted for tariffs so far is smaller than amounts mentioned in previous threats. Trump has warned that the United States may ultimately target over $500 billion worth of Chinese goods, an amount that roughly matches its total imports from China last year.

For the week, the Dow Jones Industrial Average chalked up a gain of 0.7 percent, the S&P 500 was up 1.5 percent, and the Nasdaq was 2.4 percent to the good.

Although the equity markets appeared minimally affected by American and Chinese tariffs going into effect, there is definite concern that prolonged trade tensions could roil the markets, as they have on several occasions this year.

Shares of Biogen Inc rose 19.6 percent, that company’s largest percentage gain in more than a decade, after the company and Japanese pharmaceutical company Eisai indicated that their Alzheimer’s drug showed promise in a mid-stage trial. Biogen led the S&P 500 in percentage gains and was among the largest aids to the index.

The S&P 500 healthcare index rose 1.5 percent, the largest percentage gainer among the S&P’s major sectors, while the Nasdaq biotech index rose 3.7 percent.

Besides Biogen, technology heavyweights Apple, Microsoft and Facebook provided the largest improvements to the S&P 500. The S&P technology index rose 1.2 percent.

Approximately 5.30 billion shares changed hands on the major domestic equity exchanges, as compared to the 6.98 billion share average over the past 20 trading days.

Job Growth Strong

Job growth exceeded expectations in June as manufacturers stepped up hiring. At the same time, wage gains pointed to moderate inflation pressures that should keep the Federal Reserve on a path of gradual interest rate increases.

According to the Labor Department’s report that was released Friday morning, nonfarm payrolls rose by 213,000 jobs in June. Data for April and May was revised to show 37,000 more jobs created than previously reported. The economy needs to create roughly 120,000 jobs per month to keep up with growth in the working-age population.

The unemployment rate rose to 4.0 percent from an 18-year low of 3.8 percent in June as more people entered the labor force in a sign of confidence in the jobs market. That was the first increase in the jobless rate in 10 months.

The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, rose to 62.9 percent last month from 62.7 percent in May. It had declined for three straight months.

Average hourly earnings gained five cents, or 0.2 percent in June after increasing 0.3 percent in May. That kept the annual increase in average hourly earnings at 2.7 percent.

The moderate wage growth should allay fears of a strong build-up in inflation pressures. The Fed’s preferred inflation measure hit the central bank’s 2 percent target in May for the first time in six years. It is expected to hover around its target for a while, in part because of labor market tightness.

A broader measure of unemployment, which includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment, rose to 7.8 percent last month from a 17-year low of 7.6 percent in May.

The employment report together with data from the Commerce Department showing the trade deficit narrowed 6.6 percent to a 1-1/2-year low of $43.1 billion in May reinforced expectations of robust economic growth in the second quarter.

Gross domestic product estimates for the April-June period are above a 4 percent annualized rate, double the 2.0 percent pace logged in the first quarter.

However, the administration’s “America First” trade policy, which has tipped the United States into a trade war with China poses a risk to the labor market and economy.

The policy has imposed tariffs on a range of imported goods, including steel and aluminum, to protect domestic industries from what he says is unfair competition from foreign manufacturers.

Major trade partners, including China, Canada, Mexico and the European Union, have retaliated with their own tariffs. The U.S. and China slapped tit-for-tat duties on $34 billion worth of the other’s imports on Friday.

Tit-for-tat import tariffs will likely disrupt the supply chain, undermine business investment and raise prices for consumers, while at the same time nullifying the stimulus from a $1.5 trillion tax cut package that came into effect in January.

The manufacturing sector will bear the brunt of the trade fights through a slowdown in hiring and capital expenditure. However, for now the sector, which accounts for about 12 percent of the U.S. economy, appears in good health.

Manufacturers hired 36,000 workers in June, the most in six months, adding to the 19,000 jobs created in May. The factory jobs were concentrated in the automobile sector, which had seen a decline in employment in May after a fire at a parts supplier disrupted production.

Construction payrolls rose by 13,000 last month after rising by 29,000 jobs in May. There were increases in professional and business services employment as well as leisure and hospitality. But retailers cut 21,600 jobs last month, after boosting payrolls by 25,100 in May.

Trade War Begins in Earnest

The United States and China began adding tit-for-tat duties on $34 billion worth of each other’s imports on Friday, with Beijing accusing Washington of triggering the “largest-scale trade war” as the world’s two biggest economies sharply escalated their conflict.

Hours before Washington’s deadline for the tariffs to take effect, Trump upped the ante, warning that the United States may ultimately target over $500 billion worth of Chinese goods, or roughly the total amount of our imports from China last year.

China’s commerce ministry, in a statement shortly after the U.S. deadline passed on Friday, said that it was forced to retaliate, meaning imported U.S. goods including cars, soybeans, and lobsters also faced 25 percent tariffs.

China’s soymeal futures fell more than 2 percent on Friday afternoon before recovering most of those losses, amid initial market confusion over whether Beijing had implemented the tariffs, which it later confirmed it had.

Friday’s long-expected tariff volley fueled fear that a prolonged and escalating battle would deal a blow to global trade, investment and growth, while also damaging U.S. farmers who stand to lose revenues and potentially driving up food prices in China.

“Trade war is never a solution,” Chinese Premier Li Keqiang said. “China would never start a trade war but if any party resorts to an increase of tariffs then China will take measures in response to protect development interests.”

In the run-up to Friday, there was no sign of renewed negotiations between U.S. and Chinese officials.

The dispute has roiled financial markets including stocks, currencies and the global trade of commodities from soybeans to coal in recent weeks.

Chinese shares, battered in the run-up to the tariff deadline, reversed earlier losses to close higher, but the yuan remained weaker against the dollar. Asian equities wobbled but also managed to end up.

China had lodged a case with the World Trade Organization (WTO) against the United States, its commerce ministry said in a one-line statement late on Friday.

Importers of American retail goods hit by higher Chinese duties were reluctant to pass the costs on to consumers for now.

An analysis of over four dozen targeted U.S products showed that prices were little changed on Friday afternoon from earlier in the week. The products, all sold on Chinese e-commerce platforms, ranged from pet food to mixed nuts and whiskey.

Ford Motor Co said on Thursday that for now, it will not hike prices of imported Ford and higher-margin luxury Lincoln models in China.

Some Chinese ports had delayed clearing goods from the United States, four sources said on Friday. There did not appear to be any direct instructions to hold up cargoes, but some customs departments were waiting for official guidance on imposing added tariffs, the sources said.

While Chinese state media have slammed Trump’s trade policies and on Friday likened his administration to a “gang of hoodlums,” the simmering conflict has gained little traction on China’s tightly controlled social media, not cracking the 50 top-searched topics on the Twitter-like Weibo platform.

China’s commerce ministry called the U.S. actions “a violation of world trade rules” and said that it had “initiated the largest-scale trade war in economic history.”

Trump has railed against Beijing for intellectual property theft and barriers to entry for U.S. businesses and a $375 billion U.S. trade deficit with China.

“You have another 16 (billion dollars) in two weeks, and then, as you know, we have $200 billion in abeyance and then after the $200 billion, we have $300 billion in abeyance. Ok? So, we have 50 plus 200 plus almost 300,” Trump told reporters aboard Air Force One on Thursday.

Throughout the escalating conflict, China has sought to take the high road, positioning itself as a champion of free trade, but state media ramped-up criticism of Trump on Friday.

“In effect, the Trump administration is behaving like a gang of hoodlums with its shakedown of other countries, particularly China,” the state-run China Daily newspaper said in an English language editorial on Friday.

“Its unruliness looks set to have a profoundly damaging impact on the global economic landscape in the coming decades, unless countries stand together to oppose it.”

A China central bank adviser said the planned U.S. import tariffs on $50 billion worth of Chinese goods – $34 billion plus a planned follow-on list worth $16 billion – will cut China’s economic growth by 0.2 percentage points, the official Xinhua news agency reported Friday.

China’s tariff list is heavy on agricultural goods such as soybeans, sorghum and cotton, threatening U.S. farmers in states that backed Trump in the 2016 U.S. election, such as Texas and Iowa.