Foreign stock markets tumbled on Thursday morning following President Donald Trump’s announcement of a raft of tariffs on America’s trade partners — including a minimum baseline tariff of 10% on all nations.
Asian markets led the slide. Japan’s Nikkei index dropped 4% after opening, Hong Kong’s Hang Seng Index slid 2.4%, South Korea’s KOSPI fell 2.7% and Australia’s ASX 200 fell 2%.
In Europe, the pan-continental STOXX 600 index fell 1.5% to a two-month low. Germany’s DAX fell nearly 2.5%, the French CAC 40 slipped 2.2% and Spain’s IBEX index dropped 1.5%. Britain’s FTSE 100 index lost 1.5%.
U.S. markets closed up ahead of Trump’s Wednesday Rose Garden presentation, but stock futures dropped on Wednesday night. Dow Jones futures plummeted 2.7%, S&P 500 futures sank 3.9% and futures tied to the NASDAQ 100 dropped 4.7%.
American trading partners reacted to Trump’s tariffs announcement with condemnation and concern.
China — hit with 34% tariffs on China comes on top of 20% tariffs he previously announced — urged the U.S. to “immediately cancel its unilateral tariff measures and properly resolve differences with its trading partners through equal dialogue,” a Chinese Ministry of Commerce spokesperson said in a statement.
The tariffs will “endanger global economic development and the stability of the supply chain,” they added.
The European Union — now facing a 20% tariff — said it had a “strong plan to retaliate,” which European Commission President Ursula von der Leyen is set to deliver on Thursday. “The universal tariffs announced by the U.S. are a major blow to businesses and consumers worldwide,” von der Leyen said in a post to X on Thursday.
“Europe is prepared to respond,” she added. “We’ll always protect our interests and values. We’re also ready to engage. And to go from confrontation to negotiation.”
In a Facebook post, Italian Prime Minister Giorgia Meloni called the tariffs targeted toward the European Union “wrong.”
She added, “We will do everything we can to work towards an agreement with the United States, with the aim of avoiding a trade war that would inevitably weaken the West in favor of other global players.”
In Japan, Chief Cabinet Secretary Yoshimasa Hayashi said Tokyo “once again conveyed to the U.S. government that the recent measures are extremely regrettable and have strongly requested that they be reconsidered.” Japan is facing 24% tarrffs.
The measures, he added, “could have a significant impact on economic relations between Japan and the U.S., and ultimately on the global economy and the multilateral trading system as a whole.”
South Korea’s acting President Han Duck-soo instructed the government to “pour out all of its capabilities at its disposal to overcome this trade crisis,” in a statement quoted by the Yonhap news agency.
Han described Trump’s measures — which included 25% tariffs for all South Korean goods — as “very grave” and warned of “the approach of the reality of a global tariff war.”
Ramin Sarajari’s Comment
Stock markets often react negatively to the announcement of sweeping tariffs due to concerns about trade wars, reduced global commerce, and higher costs for businesses and consumers. Here’s a breakdown of the potential impacts and market reactions:
1. Immediate Market Reaction:
- Declines in Equities: Stocks, particularly in sectors reliant on global trade (e.g., manufacturing, autos, tech), may fall due to fears of disrupted supply chains and reduced profitability.
- Volatility Spike: Uncertainty around trade policies can lead to increased market volatility, as seen during the 2018-2019 U.S.-China trade war.
- Currency Fluctuations: The U.S. dollar might strengthen if investors seek safety, or weaken if tariffs are seen as damaging long-term growth.
2. Sector-Specific Impacts:
- Losers: Companies dependent on imports (e.g., retailers, automakers) could face higher costs, squeezing margins.
- Winners: Some domestic industries (e.g., steel, agriculture) might benefit from protectionist policies, at least in the short term.
- Tech & Global Supply Chains: Tariffs on electronics or components could hurt tech giants with complex international production networks.
3. Long-Term Economic Risks:
- Inflation: Tariffs can raise prices for consumers, complicating the Fed’s inflation management.
- Retaliation: Other countries may impose counter-tariffs, hurting U.S. exporters (e.g., agriculture, aerospace).
- Growth Slowdown: Reduced trade could dampen global economic growth, affecting corporate earnings and investor sentiment.
4. Investor Strategies:
- Defensive Stocks: Investors might shift to sectors less exposed to trade (utilities, healthcare).
- Gold & Bonds: Safe-haven assets could see inflows amid uncertainty.
- Emerging Markets: Some EMs might benefit if companies shift supply chains away from China (e.g., Vietnam, India).
5. Historical Context:
- Trump’s 2018-2019 tariffs led to market turbulence but were followed by rallies when tensions eased. Markets may price in eventual negotiations or compromises.
Bottom Line:
While tariffs aim to protect domestic industries, markets typically dislike the uncertainty and potential for trade wars. If the tariffs are seen as a negotiating tactic, volatility may persist until clearer outcomes emerge. Long-term effects depend on implementation, retaliation, and whether supply chains adapt.