Global markets plunge as Trump’s tariff plan proves more aggressive than expected

Donald Trump’s aggressive tariff offensive, announced last night and far harsher than initially expected, has sent shockwaves through global markets. U.S. indices bore the brunt of the selloff, with the S&P 500 and Dow Jones plunging nearly 4%, while the tech-heavy Nasdaq suffered an even steeper drop of over 5%, marking Wall Street’s worst day since September 2022. The turmoil quickly spread to global stock markets, with European indices posting losses between 1% and 3%.

Uncertainty over the tariffs’ impact on the global economy and corporate earnings is at the heart of the market rout. U.S. companies with significant reliance on foreign production have been hit the hardest — Nike tumbled nearly 12%, while Apple shed 9%. Investor flight has wiped out $1.7 trillion in market capitalization from the S&P 500 alone, according to Bloomberg calculations.

In Europe, Germany’s DAX was the hardest hit, sliding 2.7%, while France’s CAC 40 dropped 3.2%. Spain’s IBEX, however, limited losses to 1% as Spanish exporters as less exposed to the U.S. market. The U.K.’s FTSE 100 fared slightly better, falling just 1.3%, as Britain benefits from a lower 10% tariff rate compared to the 20% imposed on the European Union.

Asian markets were not spared from the selloff. Japan’s Nikkei fell 2.77%, Hong Kong’s Hang Seng dropped 1.52%, and South Korea’s Kospi managed to limit its losses to 0.76%.

The market shakeout is also impacting currencies and debt. The euro surged 2% against the dollar, reaching its highest level since September, trading at $1.108 per euro. Meanwhile, the yield on 10-year U.S. Treasury bonds dropped more than 16 basis points to a five-month low of 4.02%, as markets increasingly price in the likelihood of interest rate cuts. This comes despite expectations that the tariffs will drive inflation sharply higher.

Trump’s sweeping tariffs are also roiling commodity markets, particularly oil, amid fears that an escalating trade war could slow global commerce and push major economies into recession. Brent crude plunged more than 6%, slipping below $70 per barrel — its largest drop in six months. Compounding the pressure on oil prices, the OPEC+ alliance, led by Saudi Arabia and Russia, announced on Thursday that it will increase crude production by 411,000 barrels per day starting in May, accelerating its planned return of previously cut supply to the market.

For many governments, economists, and analysts, Trump’s declaration of a trade war appears to be just the beginning. European Commission President Ursula von der Leyen has called for shifting from confrontation to negotiation over the new tariffs. Meanwhile, China has demanded that the U.S. “immediately” revoke the newly announced 34% levies on Chinese goods, which come on top of the 20% tariffs already imposed. The country- and bloc-specific tariffs — rising to 20% for the European Union — will take effect on April 9, while a base tariff of 10% will be implemented starting Saturday, April 5.

Trump defends the measures as a way to push companies to relocate production to the U.S. and create jobs. However, experts warn the move could lead to a global economic downturn, rising inflation, and a higher cost of living. “This is a game changer, not only for the US economy but for the global economy. Many countries will likely end up in a recession,” said Olu Sonola, head of economic research at Fitch Ratings. The United States’ trading partners are widely expected to retaliate with countermeasures, which could further drive up prices worldwide

In the European stock market, the impact of tariffs is strongly felt, particularly in companies like Adidas, which dropped 9.6%, and luxury brands such as Pandora (-11%) and Swatch (-6.8%). Swedish shipping giant Maersk, which has acknowledged that the tariff plan “clearly isn’t good news for [the] economy, stability, and world trade,” saw a loss of more than 10%. However, the company has refrained from quantifying the impact on its financials for the time being. On the other hand, pharmaceuticals have managed to stay relatively unaffected by the negative sentiment. AstraZeneca rose 1.4%, and Novartis gained 0.4%, as no specific tariffs were announced for the sector.

On Wall Street, the declines of Nike (-11%) and Apple (-9%) stand out, as both companies are highly dependent on supply chains in factories outside the U.S. Citi analysts estimate that if Apple absorbs the cost increases from tariffs on Chinese imports, its gross margin could be impacted by up to 9%. Conversely, carmakers like General Motors and Ford limited their losses to 2%, aligning with the 25% tariffs on vehicles imported into the U.S. Components manufactured in Mexico and Canada are exempt from the new tariffs, while Japanese, South Korean, and German automakers are among the hardest hit.

According to Safra Sarasin asset management, “U.S. equities are affected by the economic fallout in the U.S.” They also note that “current valuations of approximately 20 times trailing 12-month earnings are in line with the level at which the S&P 500 was trading during the August 2024 growth crisis, although a recession is not expected.” Macroeconomic data released on Thursday added to the negative sentiment: the ISM services index fell to 50.8 in March, down from the consensus estimate of 52.9 and a drop from 53.5 in February.

Amid this turmoil, investors are bracing for slower U.S. economic growth and are turning to safe-haven assets like gold and the yen. The precious metal surged to an all-time high above $3,160 per ounce.

“The U.S. effective tariff rate on all imports look to be the highest level in over a century‚” said Citi’s global rates trading strategist," said Ben Wiltshire, trading strategist at Citi.

“The tariffs are so comprehensive and so much larger than we expected. People were talking earlier about whether clarity would boost the market. But now you have clarity, and no one likes what they see,” Jeanette Gerratty, chief economist at the firm Robertson Stephens, told Reuters.

Tony Sycamore, an IG market analyst, said: “The tariff rates unveiled this morning far exceed baseline expectations, and if they aren’t negotiated down promptly, expectations for a recession in the U.S. will rise dramatically.”

“You are going to have a supply-side shock via tariffs on the U.S. economy, on prices,” said Tai Hui, Asia-Pacific chief market strategist at J.P. Morgan Asset Management. “And then (there’s) the uncertainty when it comes to businesses and consumers, both of which could be problematic for growth.”

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