Global stock markets took a wild plunge after the imposition of wide-ranging tariffs by U.S. President Donald Trump. As a result, on Thursday, gold prices hit an all-time high of $3,167.57 per ounce. This spike is a result of investors going to safety because of the rising economic uncertainty.
The UK’s FTSE 100 share index fell by 1%, while France’s Cac 40 dipped 1.7%. Berlin’s markets saw losses over. This downturn reflects the underlying fear amongst traders regarding what tariffs might mean for the overall health of the global economy.
Markets immediately reacted to the news with alarm, as traders worried that these tariffs would unleash a torrent of inflation and collapse economic growth in response. The new tariffs consist of a 10% baseline tariff and elevated duties on other partners. It would be a historic change in U.S. trade policy, perfectly undoing 30 years of trying to liberalize trade and mold the world’s trade policies in our own image.
Jay Hatfield, chief executive at Infrastructure Capital Advisors, called it “the worst possible outcome.” He further noted that the tariffs could be “enough to potentially send the U.S. into a recession,” heightening fears about the broader economic landscape.
Arguably, markets across Asia were not spared from the fallout. Japan’s Nikkei closed down almost 3%, and Hong Kong’s Hang Seng index was down 1.5%. The downward trend of these markets shows a clear and mounting concern that the U.S. administration’s economic plan is not doing what it was intended to do.
George Saravelos heads Deutsche Bank Research FX. He characterized the tariffs as a “highly mechanical” reaction to trade deficits. He expressed concern about the market’s perception of the planning process behind such major economic decisions, stating, “The market may question the extent to which a sufficiently structured planning process for major economic decisions is taking place.”
Traders were hungry for a more “sophisticated assessment” of trade deficits from the White House. Many were left disappointed and confused by the ambiguous information that clouded the new directive. Worries over these punitive tariffs have caused some to speculate that they may reduce the thin policy credibility of the Trump administration.
Global markets are starting to respond to all of these changes. Investors should be wary of the longer-term effects of Trump’s tariff strategy not only on U.S. economic growth but on U.S. international trade relationships.