Donald Trump launched a new assault on the global trading order, imposing a barrage of new tariffs including on most US imports in a move that sent shockwaves across equity, debt and currency markets.
The president said on Wednesday that a levy of 10 per cent would apply to nearly all US imports from April 5 as he also revealed additional so-called reciprocal duties, meaning total tariffs as high as 20 per cent on the EU and 24 per cent on Japan would take effect on April 9.
US tariffs on China, the world’s biggest exporter of goods, will rise to 54 per cent after Trump imposed a further 34 per cent duty on top of 20 per cent levies he placed on the Asian nation earlier this year. That could rise significantly if the US follows through on levies targeting buyers of Venezuelan oil.
Overall, America’s tariff level will rise to the highest level in decades assuming the measures go into effect, Wall Street banks said on Wednesday evening.
Trump’s announcement sent US stock-index futures sliding, with contracts tracking the S&P 500 down 3.3 per cent and those following the tech-heavy Nasdaq 100 down 4.2 per cent in early Asia trade on Thursday.
The declines come after the blue-chip S&P 500 dropped almost 5 per cent in the first three months of the year on fears Trump’s tariffs will slow economic growth and set off a new bout of higher inflation.
Trump billed the new duties on goods entering the US as way to “liberate” the economy, raise money for the federal government to pay for tax cuts and spark a resurgence in domestic manufacturing.
“In the face of unrelenting economic warfare, the United States can no longer continue with the policy of unilateral economic surrender,” Trump said to an outdoor audience at the White House.
“We have to take care of our people, and we’re going to take care of our people first.”
But investors and analysts said the tariffs would upend supply chains and cascade across corporate America.
“This is close to the worst case that the market feared,” said Ajay Rajadhyaksha, global chair of research at Barclays. “This will cause damage.”
JPMorgan chief US economist Michael Feroli added that the tariffs would significantly increase inflation and lower consumer spending. “This impact alone could take the economy perilously close to slipping into recession. And this is before accounting for the additional hits to gross exports and to investment spending,” he said.
American corporate behemoths including Apple, Walmart, Amazon and Nvidia sustained heavy losses in after-hours trading on Wall Street.
Japan’s Topix slid 4 per cent per cent in early trading, while the yen, which typically rises during time of growing investor angst, jumped almost 1 per cent against the dollar.
Gold rose 0.7 per cent to a new record high of $3,150 a troy ounce. US and Japanese government bonds — considered to be among the world’s safest assets — rallied as well, pushing yields lower.
Trading volumes are typically thin in the Asia morning, which can exacerbate the scale of share price movements.
The announcements from Trump during what he billed as “liberation day” will escalate trade frictions that have been building since he won November’s election on a populist agenda of economic protectionism.
Analysts said US trading partners would have little option but to retaliate against Trump’s measures, raising the prospect of an economically damaging global trade war.
“‘Retaliation day’ will follow ‘liberation day’,” said Luca Paolini, chief strategist at Pictet Asset Management.
“Governments will look weak if they don’t hit back, he added, but expected them to “leave the door open” to negotiation. The broad-based tariffs increased the chances of a US recession, he said.
Some items would be exempt from the reciprocal tariffs, according to the White House, including energy and minerals not available in the US, as well as bullion and some goods Trump has put other duties on already.
Those include steel and aluminium, along with cars, and imports that Trump has signalled he will apply a separate set of tariffs to, including copper, pharmaceuticals, computer chips and lumber.
Mexico and Canada — trading partners Trump has repeatedly attacked in recent weeks — were also spared from the universal tariff. Goods from the two countries that comply with the 2020 trade deal they signed with the US would remain exempt from tariffs.
“It’s bad news for the world, especially the countries that got tariffs, but it’s good news for Mexico,” said Gabriela Siller, head of financial and economic research at Banco Base. “Mexico could end up winning market share despite Trump’s protectionist rhetoric.”
Reporting by Aime Williams, James Politi, Steff Chávez and Alex Rogers in Washington, Harriet Clarfelt in New York, Ian Smith in London and Christine Murray in Mexico City
