The US President's foreign trade policies have raised fears around the world of an escalating trade war and global economic repercussions.
Stocks in Europe and the United States fell on Tuesday after President Donald Trump's tariffs on goods from Canada, Mexico and China raised fears they would cause serious damage to the global economy.
The Financial Times writes about this.
European Markets Collapse
In Europe, fears that their goods could be Trump's next target have sent Germany's Dax index down 3.5%, its worst performance in three years, following a sharp fall in shares of exporters such as Continental and Daimler Truck. The continent-wide Stoxx Europe 600 index fell 2.1%.
Trump's tariffs on imported goods have angered U.S. neighbors and fueled fears of an escalating trade war around the world. The publication notes that “the president's protectionist moves have heightened investor concerns about a slowing global economy.”
“A global trade war is a lose-lose situation. Some people will lose relatively more than others, but everyone will lose,” said Alain Bokobza, head of global asset allocation at Societe Generale.
In the US, the S&P 500 stock index, which hit a record high less than two weeks ago, fell 1% to 5,790.24 by the start of the day, at one point erasing all the gains it had made since Trump won the election on November 5.
The U.S. stock market has taken a hit in recent days, in contrast to the rapid gains that followed Trump's election victory, when investors bet on his promise to cut corporate taxes to boost profits. The index has fallen 6% over the past two weeks as Trump's actions have weighed on investor sentiment.
“This is what happens when a market that was initially focused on the ideal sees what it least wanted: higher rates and slower growth,” said Stephen Gray, chief investment officer at Gray Value Management.
In addition, bank stocks, which are sensitive to economic shocks, also fell sharply on Tuesday, with the KBW Bank index falling 4.2%, Citigroup and Bank of America falling 5.6%, Morgan Stanley losing 4.9% and Goldman Sachs losing 3.6%.
Tariffs in place today are already among the highest in decades, and there is a chance they will increase further as tensions continue to escalate.
Countermeasures by US trading partners
Canadian Prime Minister Justin Trudeau has already claimed that Trump gave a “completely bogus” reason for imposing tariffs (cross-border fentanyl trafficking). Trudeau suggested that the US president actually wanted to provoke a “collapse of the Canadian economy” to facilitate Canada's annexation.
He added that Ottawa would respond by immediately imposing a 25% tariff on some US imports and would expand the list of US goods subject to such a tariff within 21 days.
Ontario, Canada's most populous province, said it would immediately end its contract with Elon Musk's satellite internet provider Starlink and bar American companies from government tenders. It also announced a ban on the sale of alcohol produced in the United States.
Mexico said it would unveil its retaliatory measures on Sunday, and China said it would impose tariffs of 10-15% on all U.S. agricultural goods starting March 10.
Recall that Trump said that the European Union was created “to rob the United States” and announced a 25% tariff on all goods from the bloc. The European Union said that it would “respond decisively and immediately to unjustified barriers to trade.”