The global financial markets have been thrown into chaos as Donald Trump’s intensifying trade war has erased trillions of dollars from the value of the largest corporations worldwide, while increasing concerns over a potential recession in the US.
As world leaders reacted to the US president’s “liberation day” tariff policies undermining the global trade framework, approximately $2 trillion (£1.5 trillion) was lost on Wall Street, with share prices also plummeting in financial hubs around the world.
Analysts indicated that Trump’s sweeping import taxes, ranging from 10% to 50% on both traditional allies and adversaries of the US, have considerably heightened the likelihood of a significant global downturn and a recession in the largest economy.
Leaders from Brussels to Beijing criticized Trump, with China denouncing his “unilateral bullying” tactics and the EU announcing plans for countermeasures.
Though Trump aimed to coordinate his Wednesday evening address in the Rose Garden to avert live reports of falling stock markets, that consequence occurred shortly after Asian markets opened hours later.
Drawing parallels with the stock market crashes during the peak of the coronavirus pandemic and the financial crisis of 2008, the sell-off spread globally, leading to significant declines in exchanges across Asia and Europe. The UK’s FTSE 100 index of blue-chip companies ended the day down 133 points, or 1.5%, at 8,474, marking its steepest drop since August.
When trading began in New York, the S&P 500 index of major US companies fell as much as 4.3% in morning trading, while the tech-centric Nasdaq index dropped 5.1%.
Libby Cantrill, head of US public policy at Pimco, one of the globe’s largest bond fund managers, remarked that investor anxiety was escalating as Trump appeared resolute in his uncompromising approach despite the market upheaval, although there remained some optimism for potential agreements with US trading partners.
“There’s likely a limit to how much distress he and his administration are ready to tolerate in order to rebalance the economy, but what that limit is remains uncertain,” she said.
“For now, we should assume his tolerance for pain is quite high and that tariffs may persist for some time.”
The US dollar hit a six-month low, declining by approximately 2.2% on Thursday morning, amid a diminishing confidence in a currency that has long been regarded as the most secure in the world.
Alerting clients to a potential “dollar confidence crisis,” George Saravelos, head of foreign exchange research at Deutsche Bank, stated: “The dollar’s reputation as a safe haven is becoming less reliable.”
The most substantial declines in stock prices on Thursday were observed among US companies with intricate international supply chains that extend into the nations targeted by Trump’s new border taxes.
Apple, which produces a majority of its iPhones, tablets, and other devices for the US market in China, saw its shares drop by as much as 9.5%, along with significant declines for other large multinationals, such as Microsoft, Nvidia, Dell, and HP.
Commodities experienced steep falls, including a 7% drop in oil prices, indicative of growing apprehensions regarding the global economic outlook.
In a characteristic show of defiance on Thursday, Trump took to his Truth Social platform to assert that his strategy was successful. “THE OPERATION IS OVER! THE PATIENT LIVED, AND IS HEALING. THE PROGNOSIS IS THAT THE PATIENT WILL BE FAR STRONGER, BIGGER, BETTER, AND MORE RESILIENT THAN EVER BEFORE. MAKE AMERICA GREAT AGAIN!!!”
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Tariffs will disproportionately impact some of the world’s most impoverished nations, with countries in South-East Asia, including Myanmar, among those most affected.
Cambodia, where approximately one in five residents live below the poverty line, was the most severely impacted country in the region with a tariff rate of 49%. Vietnam will face 46% tariffs and Myanmar, already reeling from a devastating earthquake and prolonged civil unrest following a 2021 military coup, faces a 44% tariff.
Experts warned that manufacturers of garments and sports shoes, which heavily rely on production in South-East Asia, will experience rising costs, consequently leading to increased prices for consumers globally. Shares of Nike, Adidas, and Puma all saw sharp declines.
Analysts noted that Trump’s initiatives would propel the average tariff, or border tax, charged by the US to its highest level since 1933, a scenario that threatens to plunge the US into recession while pushing up living expenses for consumers.
Trump’s proposals involve slapping a 10% tariff on all US trading partners starting shortly after midnight on April 5, followed by additional higher tariffs of up to 50% on countries such as China, Vietnam, and the EU.
The non-partisan Tax Foundation think tank estimated that this plan could equate to a “$1.8 trillion tax hike” for US consumers, which would lead to a drop in imports by more than a quarter, or $900 billion, by 2025.
While the measures are set to heavily impact the US, researchers at Oxford Economics cautioned that they could plunge global economic growth to its lowest annual rate since the 2008 financial crisis, underscoring the severity of the situation barring the peak of the Covid pandemic.
Countries rushed to gauge the implications and whether to take retaliatory action. The UK, facing the least severe 10% tariffs, hinted at potential retaliation even as it attempts to negotiate an agreement with Washington.
It released a comprehensive 417-page list of US goods that could be subject to tariffs, encompassing meat, fish, dairy products, whiskey, clothing, motorcycles, and musical instruments.
Business Secretary Jonathan Reynolds informed MPs that ministers were prioritizing an economic deal with the US but “reserve the right to take any necessary action if an agreement isn’t reached.”
French President Emmanuel Macron criticized Trump’s decision to impose tariffs of 20% on EU goods as “brutal and unfounded,” while Germany’s outgoing Chancellor Olaf Scholz deemed it “fundamentally wrong.”
Spanish Prime Minister Pedro Sánchez stated that the “protectionist” tariffs were “contrary to the interests of millions of citizens on this side of the Atlantic and in the US.”
The EU is reportedly preparing retaliatory tariffs on US consumer and industrial products—potentially including iconic items such as orange juice, blue jeans, and Harley-Davidson motorcycles—to be announced in mid-April, in response to steel and aluminum tariffs previously introduced by Trump.
