Global financial markets have been plunged into turmoil as Donald Trump’s escalating trade war knocked trillions of dollars off the value of the world’s biggest companies and heightened fears of a US recession.
As world leaders reacted to the US president’s “liberation day” tariff policies demolishing the international trading order, about $2.5tn (£1.9tn) was wiped off Wall Street and share prices in other financial centres across the globe.
Experts said Mr Trump’s sweeping border taxes of between 10 per cent and 50 per cent on the US’s traditional allies and enemies alike had dramatically added to the risk of a steep global downturn and a recession in the world’s biggest economy.
World leaders from Brussels to Beijing rounded on Mr Trump. China condemned “unilateral bullying” practices and the EU said it was drawing up countermeasures.
While Mr Trump timed his Wednesday evening Rose Garden address to avoid live tickers of crashing stock markets, that fate arrived when Asian exchanges opened hours later.
Drawing comparisons with the market crashes at the height of the coronavirus pandemic and the 2008 financial collapse, the sell-off swept the globe, sending exchanges plunging in Asia and Europe. The UK’s FTSE 100 index of blue-chip companies closed the day down 133 points, or 1.5 per cent, to 8,474 after suffering its worst day since August.
All three main US stock markets were down at the end of trading in their worst day since June 2020, during the Covid pandemic. The tech-heavy Nasdaq fell 5.97 per cent, while the S&P 500 and the Dow dropped 4.8 per cent and 3.9 per cent, respectively. Apple and Nvidia, two of the US’s largest companies by market value, lost a combined $470bn in value by midday.
Libby Cantrill, the head of US public policy at Pimco, one of the world’s largest bond fund managers, said investors were growing increasingly concerned as Mr Trump appeared to be unwilling to soften his stance in the face of market turmoil, although hope remained that he would ultimately strike deals with US trading partners.
“There is likely a limit to how much pain he and his administration are willing to endure in order to rebalance the economy, but when that is or what that looks like remains to be seen,” she said.
“For now, we should assume that his pain tolerance is pretty high and that tariffs stick around for a while.”
The US dollar hit a six-month low, falling 2.2 per cent on Thursday morning, amid a growing loss of confidence in a currency previously considered the safest in the world for most of the past century.
Warning clients to beware a “dollar confidence crisis”, George Saravelos, the head of foreign exchange research at Deutsche Bank, said: “The safe-haven properties of the dollar are being eroded.”
The heaviest falls in share prices on Thursday were reserved for US companies with complex international supply chains stretching into the countries that Mr Trump is targeting with billions of dollars in fresh border taxes.
Apple, which makes most of its iPhones, tablets and other devices for the US market in China, was down 9.5 per cent at close of trading, and there were steep declines for other large multinationals including Microsoft, Nvidia, Dell and HP.
Commodities fell sharply, including a 7 per cent plunge in oil prices, reflecting growing concerns over the global economic outlook.
Speaking to reporters on Thursday, Mr Trump said: “I think it’s going very well. It was an operation like when a patient gets operated on and it’s a big thing. I said this would be exactly the way it is … We’ve never seen anything like it. The markets are going to boom. The stock is going to boom. The country is going to boom.”
Mr Trump later said: “Every country is calling us. That’s the beauty of what we do. If we would have asked these countries to do us a favour they would have said no. Now they will do anything for us.”
Over the last nearly 24 hours, Mr Trump has faced widespread backlash from US lawmakers and global leaders over his tariffs plan, with the senior Republican senator Mitch McConnell calling it “bad policy” while Canada – a traditional American ally – called the tariffs “unjustified” and “unwanted”. - Guardian service
