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Stock markets around the world dropped on Thursday after Donald Trump unveiled a blitz of tariffs on US trading partners that went further than most investors had expected.
Shares of export-focused companies led a sell-off in Europe and Asia, while US stock futures tumbled, as markets reeled from the president’s full-blown assault on the global trade order.
“It’s worse than expected, there’s no sugar-coating it,” said Zhikai Chen, head of global emerging market equities at BNP Paribas Asset Management.
The Stoxx Europe 600 was down 1.3 per cent in early trading, while Japan’s Topix closed 3.1 per cent lower and Hong Kong’s Hang Seng index fell 1.5 per cent.
The UK’s FTSE 100 was down 1.1 per cent and Germany’s Dax lost 1.4 per cent.
On Wall Street, futures pointed to a 2.8 per cent opening decline for the S&P 500, piling further pain on a market that had already been pushed into a correction this year by Trump’s tariff threats and a sell-off in the tech sector.
The declines came after the White House on Wednesday revealed sweeping 10 per cent tariffs on nearly all US imports, and levies of 20 per cent on EU goods and 34 per cent on Chinese goods, on top of tariffs already announced.
The dollar fell 1.4 per cent against a basket of trading partners’ currencies in one of its worst days in the past year, as investors fretted about the impact on the US economy.
The Japanese yen rallied 1.5 per cent as traders looked for protection amid the dollar’s fall. Chinese tech companies such as Alibaba and Tencent, as well as exporters including BYD, were hit hard.
Government bonds surged as investors looked for safety and traders rushed to price in a central bank response to the economic fallout. Ten-year US Treasury yields fell 0.12 percentage points to 4.07 per cent as the price of the debt jumped.
Traders are now pricing three or four quarter-point interest rate cuts from the Federal Reserve to shore up the US economy, up from three on Wednesday, according to levels implied by swaps markets.
“Even if tariffs are ultimately reduced by year-end, the near-term shock and associated uncertainty is likely to drive a near-term slowdown in the US economy and reduce full-year 2025 growth to closer to or below 1 per cent,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.
The gold price fell back to $3,154 a troy ounce after surging overnight to a record high during Asian trading. Economically sensitive commodities fell, with Brent crude oil prices sliding 3 per cent.
The tariff announcement is widely expected to be followed by a period of negotiation. But Deutsche Bank’s Jim Reid said investors had been “too optimistic” about comments before the announcement from Treasury secretary Scott Bessent that the initial levies would be a cap.
Investors focused instead on the likelihood of tariff reprisals, or what one European fund manager dubbed “retaliation day” to follow Trump’s “liberation day”.
“Definitely it’s more dramatic than expected,” said Ding Shuang, chief greater China economist at Standard Chartered. “Even for China the additional [tariff] increase is higher than expected.”
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