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Donald Trump’s tariff offensive convulsed global markets on Thursday, with sectors from banking to tech left reeling from the US president’s bid to remake the global economic order.
Wall Street stocks sustained heavy losses, with the S&P 500 and Nasdaq Composite plunging by 4.8 per cent and 6 per cent respectively, hours after Trump announced the highest US tariffs for over a century. It was the worst day since the 2020 coronavirus crisis for both benchmarks.
The dollar fell 1.6 per cent against a basket of rivals, the worst daily decline since 2022.
“The collapse is a loss of confidence in dollar-denominated assets in general,” said Francesco Pesole, a currency strategist at ING. “It’s a vote of no confidence on 100 days of Trump.”
As economists predicted that the new duties would stoke inflation and hit growth, US bank stocks sank on recession fears, with the sector’s KBW Index down 9.9 per cent, its worst day since March 2023.
More than $250bn was wiped off Apple’s market capitalisation as shares in the world’s most valuable company slid 9.3 per cent, with investors bracing for the impact of Trump’s tariffs on the iPhone maker’s Asian manufacturing hubs.
Brent crude, the global oil benchmark, was down 6.7 per cent at $69.94 a barrel.
“Markets were very complacent, and now they are going into the spiral mode of trading toward a recession until they have probable cause to stop,” said Robert Tipp, PGIM’s head of global bonds.
Investors rushed into US Treasury bonds, a traditional safe-haven investment in moments of market turmoil. Shorter-dated bonds were the biggest beneficiaries, with the biggest moves in two- and three-year yields since August 2024.
Shorter-dated bonds move with interest rate expectations and Thursday’s rise in yields suggests investors are betting on more rate cuts from the Federal Reserve. Yields move inversely to price.
“There has been a massive flight to quality into Treasuries,” said Matthew Scott, head of core fixed-income and multi-asset trading at AllianceBernstein.
The moves came after Trump’s announcement on Wednesday of a levy of 10 per cent on nearly all US imports from April 5, and “reciprocal” tariffs as high as 50 per cent from April 9 on dozens of countries.
Levies on Chinese exports are set to rise to over 60 per cent, after the US president added 34 per cent tariffs to previously imposed duties.
Analysts said the measures could sharply reduce China’s GDP growth this year and push the world’s second-largest economy to shift from manufacturing for export towards domestic consumption.
China’s commerce ministry said on Thursday Beijing would “resolutely take countermeasures to protect its own rights and interests”. The foreign ministry added: “It is clear that more and more countries have come to stand against the US’s tariff hikes and other unilateral bullying moves.”
Trump has argued his duties will help restore American manufacturing, encourage investment, prevent other countries from “ripping off the US” and provide trillions of dollars of revenue to finance tax cuts.
“The markets are going to boom,” Trump said on Thursday, adding that “the country is going to boom”. The president also continued making his claim that US trading partners “have taken advantage of us for many, many years”.
But there are signs of strain in the US. Carmaker Stellantis said it would furlough 900 workers at five plants in the US as a result of a temporary shutdown of production in Canada and Mexico in response to separate Trump-imposed tariffs of 25 per cent on foreign car imports.
Consumer-focused groups, including sportswear group Nike and electronics retailer Best Buy, were among the worst hit as worries swirled over how the latest tariffs will affect already-gloomy sentiment among American households and potential damage to supply chains.
Washington’s traditional allies responded with dismay to what they depicted as an act of economic hostility, with French President Emmanuel Macron urging European companies to pause investment in the US.
“What would the message be of having major European actors investing billions of euros in the American economy at a time when they are hitting us?” he said, adding that “nothing is excluded” in terms of retaliation.
By contrast, UK Prime Minister Sir Keir Starmer told business leaders on Thursday he would redouble efforts to secure a trade deal with the US after early negotiations failed to stop Trump slapping a 10 per cent tariff on all British exports.
François Bayrou, Macron’s prime minister, said Trump’s move was “a catastrophe for the world economy . . . [and] also a catastrophe for the US and for American citizens”.
With the EU facing a 20 per cent tariff, Germany’s Ifo Institute for Economic Research said the tariffs would “massively damage” the German economy and could lead it to contract this year.
Some of the world’s poorest and smallest countries will also be badly impacted by the tariffs, with the tiny mountain kingdom of Lesotho targeted by a 50 per cent levy and Nauru hit by a 45 per cent duty.
Reporting by Kate Duguid, Harriet Clarfelt and George Steer in New York, Steff Chávez in Washington and Ian Smith in London