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Stocks fell in Europe and the US on Tuesday, after President Donald Trump’s tariffs on Washington’s trading partners sparked fears of serious damage to the global economy.
Markets in Europe fell sharply amid fears that goods from the continent could be next to face US tariffs. Germany’s Dax index sank 3.5 per cent, its worst day for three years, hit by heavy falls for exporters such as Continental and Daimler Truck. The continent-wide Stoxx Europe 600 dropped 2.1 per cent.
The losses came after Trump’s 25 per cent tariffs on imports from Mexico and Canada took effect on Tuesday, triggering outrage from the US’s neighbours and stoking fears of a trade war.
The White House also imposed an additional 10 per cent levy on goods from China, on top of last month’s 10 per cent tariff, as the president’s protectionist moves fuelled investor concerns over a worldwide economic slowdown.
“A global trade war is a lose-lose situation for everyone,” said Alain Bokobza, head of global asset allocation at Société Générale. “Some people will lose relatively more than others but everyone will lose.”
In the US, the S&P 500 — which hit a record high less than two weeks ago — fell 1 per cent to 5,790.24 points by early afternoon, at one point giving up all the gains accumulated since Trump’s election victory on November 5.
The US stock market has been hard hit in recent days, in contrast with the rally that followed Trump’s triumph at the polls, when investors bet his promise to cut corporate taxes would boost profits.
The index has fallen 6 per cent over the past two weeks as tariff concerns and a flurry of weak economic data have begun to weigh on investor sentiment.
“This is what happens when a market that was priced for perfection sees what it least wanted to see: tariffs and slowing growth,” said Steven Grey, chief investment officer at Grey Value Management.
The president’s tariffs against the US’s three largest trading partners have raised duties to some of the highest levels in decades, with the prospect of further increases as tensions rise still higher.
Canadian Prime Minister Justin Trudeau said Trump’s stated reason for the tariffs — the cross-border trafficking of fentanyl — was “completely bogus” and suggested the US president really wanted to trigger “the total collapse of the Canadian economy because that will make it easier to annex us”.
He added that Ottawa would retaliate with an immediate 25 per cent tariff on C$30bn (US$21bn) of US imports and tariffs on another C$125bn of US goods 21 days later.
Ontario, Canada’s most populous province, said it would immediately rip up its contract with Starlink, the internet satellite provider founded by Elon Musk, and bar US companies from government tenders. It also announced it would no longer sell US-made alcoholic drinks.
While Mexico will wait until Sunday to unveil countermeasures, China said it would levy a 10-15 per cent tariff on US agricultural goods, ranging from soyabeans and beef to corn and wheat, from March 10.
Even before this week’s tariffs, some US economic indicators signalled possible problems ahead.
A survey conducted by the American Association of Individual Investors showed investor confidence plunged close to an all-time low in late February, while the Federal Reserve Bank of Atlanta’s running estimate of US GDP growth, published on Monday, pointed to a 2.8 per cent contraction in the first quarter.
Bank stocks — which are sensitive to economic jitters — suffered heavy declines on Tuesday, with the KBW Bank index down 4.2 per cent.
Citigroup and Bank of America fell 5.6 per cent on Tuesday. Morgan Stanley lost 4.9 per cent and Goldman Sachs shed 3.6 per cent.
