What does the Prince mean when he says " all are punished"?

Everyone suffers because of the feud.

The Prince is referring to the fact that all the members of the two families have have "lost a brace of kinsmen," meaning that they have been equally punished.

A "brace" is actually two, and although he refers to himself first, "And I for winking at your discords have lost a brace of kinsman," (Paris and Mercutio are his relatives), the Capulets have lots two (Tybalt and Juliet) and the Montagues have lost Romeo.