Financial markets across the world have been thrown even further into meltdown after Donald Trump hit China with huge 104% tariffs – worsening fears of a new global recession.
The FTSE immediately dropped by 2.4% this morning and Asian shares sank again overnight as the latest set of tariffs – including the massive levy on Chinese imports – went into effect at around 5am BST. It follows days of freefall on the financial markets triggered by the US president’s new border taxes, which threaten to upend existing relationships and set off a global trade war.
Trump announced the ‘legendary’ 104% tariff on China last night after the country unveiled a retaliatory rate of 34% on US imports, the same figure imposed on them by Trump on ‘Liberation Day’.
The Nikkei 225 in Japan was down 4.7% at 32,475.57 this morning, while in Hong Kong the Hang Seng lost 1.8% to 19,769.24. Tthe Shanghai Composite in China index edged just four points lower, to 3,141.46. Turmoil continued after the London Stock Exchange and other European markets opened this morning, with the FTSE already having experienced its heaviest fall since the beginning of the Covid pandemic over the past week.
Stocks had briefly rallied globally on Tuesday, with indexes up 6% in Tokyo, 2.5% in Paris and 1.6% in Shanghai, amid optimism that the White House may be edging closer to new deal with Beijing on imports. These gains were wiped out after it later emerged the president was planning further action against China.
On Tuesday, the S&P 500 in New York dropped 1.6% after wiping out an early gain of 4.1%.
That took it nearly 19% below its record set in February. The Dow Jones Industrial Average dropped 0.8%, while the Nasdaq composite lost 2.1%. Uncertainty is still high about what President Donald Trump will do with his trade war.
More swings up and down for financial markets are expected over the coming hours given the uncertainty over how long Trump will keep the stiff tariffs on imports, which will raise prices for US shoppers and slow the economy.
Economic shockwaves caused by the crash and inflationary pressure on retail goods mean the effects will also be felt across the world, including the UK, and if they last a long time, economists and investors expect them to cause a recession.
But Donald Trump has insisted the measures will restore US manufacturing and bring back jobs that have gone overseas. Talking up his tariffs last night, he said: “It’s going to be legendary, you watch – legendary in a good way, I have to say. It’s simple, we’re making deals, and countries are paying tariffs. Right now, China is paying a 104% tariff.
“It sounds ridiculous, but they charged us for many items 100%, 125%, many countries have – they’ve ripped us off left and right. But now it’s our turn to the rippin’.”
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Yesterday, the Chinese government accused the US of “blackmail” and said Trump’s threat of new tariffs if it did not row back on its own 34% reciprocal tariff were a “mistake on top of a mistake”.
Within the US, Trump has faced increased pressure from his billionaire allies to soften his position amid warnings of an imminent recession. In the latest sign of a rift within the White House, outgoing DOGE head Elon Musk yesterday called Trump’s trade adviser Peter Navarro “truly a moron” and “dumber than a sack of bricks.”
Navarro previously had said Musk, a billionaire who will soon leave his job heading Trump’s government downsizing initiative, was “protecting his own interests” by opposing tariffs.
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