By Samuel Shen, Saqib Iqbal Ahmed and Amanda Cooper
NEW YORK/SHANGHAI/LONDON (Reuters) – President Donald Trump’s new tariffs sent shockwaves through markets on Thursday, with the dollar and U.S. stocks among the hardest hit on fears a broadening trade war will spur recession in a fragile world economy.
A combination of a 10% baseline levy and higher duties imposed on several trading partners reverses decades of liberalisation that shaped the global trade order.
“These tariffs are worse than expected, as shown by equities trading significantly down and gold and bonds trading up. Clearly, the reading here is that the recession risk is on the rise,” Kasper Elmgreen, chief investment officer of fixed income and equities at Nordea Asset Management, said.
“If anyone should be uncertain that globalisation has reversed, this is the signifier.”
A fall in the dollar, a 3.4% slide in Nasdaq futures and the biggest jump in the bond market for nine months, as 10-year Treasury yields fell to just above 4%, all pointed to deep discomfort about the world’s biggest consumer market disappearing behind a tariff wall.
“The higher tariffs will dent U.S. efforts to reduce inflation, so it’s possible the U.S. will witness stagflation,” said Wang Zhou, partner at Zhouzhu Investment in Shanghai.
“Investors are voting with their feet.”
European shares fell, led by declines in tariff-sensitive sectors such as retail and luxury, although the sell-off was a lot more muted, with the STOXX 600 down 1.7%, while the euro jumped over 1.5%.
Fed funds futures rallied as investors priced in a higher chance of the Federal Reserve cutting interest rates.
The base 10% tariffs go into effect on April 5 and the higher reciprocal rates on April 9.
Tariffs of 25% on vehicle imports took effect at midnight. The new levies include a 34% tariff on imports from China, 46% on Vietnam, 24% on Japan and 20% on Europe.
The U.S. dollar index sank to a near six-month low on Thursday, falling the most against safe havens such as the yen and franc. [FRX/]
A 3% slide in S&P 500 futures suggested a steep drop later on Wall Street, as shares in Nvidia and Apple fell 6% and 7%, respectively.
Eric M. Clark, a portfolio manager at Alpha Brands in California, noted that S&P 500 companies get over 40% of their revenue from overseas.
“This raises the risk of recession here even higher,” he said.
‘NO ONE LIKES WHAT THEY SEE’
Announcing the levies, Trump spoke in terms of fairness, arguing that “reciprocal” tariffs were a response to duties and other non-tariff barriers placed on U.S. goods.
