Tom Espinner and Natalie Sherman
Business reporter, BBC News
Getty Images
Financial market turmoil deepened on Friday as China fought back against tariffs announced by Donald Trump, increasing the possibility of extension of the trade war and damage to the global economy.
The S&P 500 Index, the broadest measure of the US stock market, fell by around 4% in noon trade, but the NASDAQ sank about 4.3%, losing about a fifth of its value since February.
In the UK, the FTSE 100 plummeted almost 5%. This was the most dips in five years, but Asian markets also fell, with the German and French exchanges facing similar falls.
Vowing to reshape the global trade order, Trump dismissed concerns about the market shock, pointing out the strong US labor market.
“Good luck,” he urged his followers on social media. “We can’t lose.”
The stock market lost its estimated trillion value in two days. This is a defeat caused by Trump’s announcement to wipe out new 10% import taxes on goods from all countries.
Products from dozens of countries, including major trading partners such as China, the European Union and Vietnam, face far higher fees.
The move is expected to come into effect immediately on Saturday, equivalent to the largest U.S. tax hike since 1968, analysts said.
They warn that the measure will lead to trade contraction and will lead many countries to economic recession.
China responded on Friday by adding US goods that hit with a 34% import tax, curbing exports of major minerals, and adding US companies to the blacklist, describing Trump’s actions as “bullying” and violations of international trade rules.
Other countries have yet to respond and appear to be hoping that they can negotiate the deal despite conflicting signals from the White House about conflicting talks.
On Friday, Trump said he made a “very productive call” with Vietnam General Secretary, criticizing China’s move.
“China got it wrong, they panic – one thing they can’t afford to do,” Trump wrote on social media in all capital letters.
With Trump’s announcement on Wednesday, goods from China faced a 34% tariff rate, increasing overall collection to at least 54%.
He announced a new 20% tax on goods from the EU, and a tax rate of more than 40% in Asian countries such as Vietnam, which have become a key centre for manufacturing since Trump began raising tariffs in China in his first term.
Trump made a similar promise last year on the campaign trail. However, the move was far more extensive than many analysts expected.
“The shock factor was Vietnam,” said Simeon Siegel, managing director of BMO Capital Markets.
“For the past years, most companies have been trained to believe they need to lean from China, but that didn’t mean they would lean towards the US,” he added. “But at least the only place to hide like that [Trump’s announcement]It was in the United States. ”
In the UK, the FTSE 100 index fell 4.95%, the largest day drop since March 27, 2020.
In Europe, France’s CAC 40 fell by 4%, while in Germany the DAX fell by about 4.6%.
In Japan, which the Prime Minister previously called the situation a “national crisis,” the Nikkei 225 fell by more than 2.7%.
Russ Mold, investment director at AJ Bell, said the “relentless sales” continued despite being investors, despite “hoping that the pain would go away.”
“There are so many moving parts that I lift my head to the situation [as an investor] It’s not easy,” he said.
“With countless sectors being set up to be hit by tariffs, it’s difficult to know where to start to understand the situation.”
