In a tumultuous response to President Donald Trump’s recent tariff announcements, global stock markets have witnessed a notable decline. This downturn marks the steepest drop in US stocks since the onset of the COVID-19 pandemic in 2020. Following the announcement of new tariffs expected to elevate prices and hinder economic growth both domestically and internationally, the S&P 500 experienced its worst performance in years, as markets in the Asia-Pacific region followed suit, enduring a second consecutive day of losses.
Major companies feel the impact
Prominent consumer brands such as Nike, Apple, and Target faced significant losses, each seeing their stock prices plummet by over 9%. At a press briefing in the White House, Trump expressed his optimism, stating that the US economy would “boom” thanks to the introduction of a minimum 10% tariff aimed at global imports. This strategy is designed to increase federal revenue and promote the repatriation of American manufacturing.
The proposed tariffs will disproportionately affect trade partners, including China, which faces an aggregate tariff of 54%, and the European Union, which is subject to duties of 20%. Both regions have responded resolutely, with Chinese officials and EU representatives pledging retaliation. French President Emmanuel Macron has already urged European firms to reconsider any planned investments in the United States.
Concerns and market reactions
Tariffs, which act as taxes on imported goods, could lead to inflation and stunted economic growth, raising alarms among traders. The World Trade Organization has expressed its deep concerns, predicting a potential 1% reduction in global trade volumes for the year as a direct consequence of these new tariffs. On the morning of Friday following the announcement, Japan’s Nikkei 225 index dropped by 2.7%, while Australia’s ASX 200 fell by 1.6%. Meanwhile, the Kospi index in South Korea remained relatively stable.
“It was an operation like when a patient gets operated on, and it’s a big thing. I said this would exactly be the way it is,” Trump remarked, asserting confidence in the economic benefits of the tariffs.
The S&P 500 saw a staggering decline of 4.8%, erasing nearly $2 trillion in market value in just one day. The Dow Jones and Nasdaq also fell significantly, with respective declines of 4% and 6%. This sell-off has been brewing since mid-February amid escalating trade war anxieties, leading to further drops in stock indices across Europe and the UK, where the FTSE 100 index fell by 1.5%.
Trump’s high-stakes maneuver aims to overturn decades of trade liberalization that have shaped the global economic landscape. During his remarks, he indicated a potential openness to negotiations, suggesting that he might consider deals if they offered substantial benefits.
As firms grapple with the new landscape, they face tough choices: absorb the costs of the tariffs, collaborate with partners to mitigate the financial burden, or pass the costs on to consumers. The latter option poses a risk of decreased sales, which could significantly affect the US economy, as consumer spending accounts for approximately 10% to 15% of global economic activity.
In the face of stock market declines, gold prices surged to a record high of $3,167.57 per ounce, reflecting its status as a safe haven asset during periods of uncertainty. The US dollar also experienced depreciation against several currencies.
Experts warn that the economic repercussions of the tariffs could plunge the US into recession unless additional measures, such as substantial tax cuts, are implemented. Seema Shah, chief global strategist at Principal Asset Management, has expressed skepticism regarding Trump’s manufacturing revival objectives, noting that the effects of such tariffs could serve as an immediate economic drag with little short-term benefit.
In a direct consequence of these tariffs, automobile manufacturer Stellantis announced it would temporarily suspend production at facilities in Mexico and Canada, leading to layoffs affecting approximately 900 employees across five US plants that supply parts to these factories. This move underscores the real-time impact of the tariffs on both industry and employment.
As the market reacts to these developments, analysts predict continued volatility, with brands heavily reliant on international supply chains, such as Nike and Apple, likely to face ongoing challenges. The uncertainty surrounding global tariffs has left many retailers in distress, prompting concerns that further turbulence lies ahead.