Citigroup (C) saw its stock plummet 5.03% in pre-market trading on Friday, as part of a broader selloff in the banking sector. The decline comes as investors grapple with growing concerns about a potential economic slowdown and the impact of President Donald Trump's new tariffs on the financial industry.

The sharp drop in Citigroup's stock price aligns with the overall negative sentiment affecting bank stocks. The KBW Nasdaq Bank Index tumbled 9.9% in the previous session, with major consumer banks being among the hardest hit. This downturn is primarily attributed to fears of a weakening economy and the potential for reduced loan demand and increased delinquencies, which could significantly impact banks' profitability.

Analysts suggest that the escalating trade war and federal spending cuts have increased the risk of stagflation - a combination of high inflation and low economic growth. This economic uncertainty is causing investors to reassess their positions in financial stocks, including Citigroup. While banks are not directly affected by tariffs, the businesses and customers they serve are facing higher costs, which could lead to a broader economic slowdown and negatively impact the banking sector's performance in the coming months.