Donald Trump tariffs trigger stock market meltdown as more than £24billion wiped off FTSE 100
More than £24billion was wiped off the value of Britain’s biggest firms in the first few hours’ of trading in the wake of Donald Trump’s tariff bombshell.
The FTSE 100 tumbled nearly 100 points in early trading as investors digested the fall-out of the US President’s escalating trade war. The smaller FTSE 250 – which is more focused on domestic companies – also fell despite Prime Minister Keir Starmer insisting the UK was “prepared”.
It followed big falls on markets in Asia and Europe, which has seen shares take a more than £100billion hit. The signs are that stock markets in the US will open down, compounding losses in recent weeks. Around £3.8trillion has already been wiped off America’s main index.
President Trump’s new tariffs have sent new shockwaves through markets, with the dollar and US stocks among the hardest hit on fears a broadening trade war will unleash a recession. A combination of a 10% baseline levy and higher duties on a number of other trading partners reverses decades of liberalisation that shaped the global trade order.
“This is the worst-case scenario,” said Jay Hatfield, chief executive at Infrastructure Capital Advisors. “Enough to potentially send the US into a recession.” Fears of recessions globally sent oil prices down nearly 3%.
Matt Britzman, senior equity analyst at Hargreaves Lansdown, said: “The effects of ‘Liberation Day’ are being felt far and wide, with Asian markets down overnight, European stocks under pressure in early trading, and US futures pointing to a big drop later. With tariffs reaching levels unseen in over a century, the US is poised to rake in an additional $600billion (£456billion) in tariff revenue in an optimistic scenario, or put that another way, that’d be a $600bn added cost for businesses or consumers to stomach.
“While economists scramble to predict the impact on inflation and global growth, businesses around the world are getting their first real look at what a tariff-heavy US trade policy means, and this may just be the beginning of a fresh round of tariff drama.”
The share slump threatens to hit millions of workers who pay into a pension, as at least some of their retirement pot will be invested in equities. The impact will be felt most by those nearing retirement, however.
Myron Jobson, senior personal finance analyst at Interactive Investor, said: “Any sell-off in US stocks could drag down the performance of funds with heavy US exposure – not least global funds as they typically have a substantial weighting to US equities. That said, long-term investors should resist the urge to make knee-jerk decisions based on short-term market movements. A well-diversified portfolio remains the best defence against geopolitical shocks. As ever, staying the course and ensuring a balanced investment strategy is key.”
It came as experts warned the UK economy had avoided “a direct blow” from President Trump’s tariff regime but will still face a “significant” impact.
The UK currently exports around £60billion in goods to the US, including pharmaceuticals, cars and technology equipment. Experts say the impact of the tariff plans aren’t as bad as many had feared.The UK’s official economic forecaster, the Office for Budget Responsibility, warned last month that a more severe scenario, in which the UK and other nations also retaliated to the imposition of tariffs, would have dragged UK GDP 0.6 percentage points below forecasts this year. It had said this would have had a one percentage point impact next year, and “almost entirely eliminate” the Chancellor’s £9.9billion headroom against her fiscal rules.Economists said UK firms still face significant uncertainty despite avoiding the 20% tariff scenario that some had feared.Barret Kupelian, chief economist at PwC, said: “The UK avoided a direct blow – but the global economy has taken a substantial hit. For the UK, the impact is significant – though less severe than for some other countries. In the short term, businesses face a sharp rise in uncertainty.”
UK business leaders have called for the government to avoid further escalation in order to limit the economic impact of the policy announcement. Rain Newton-Smith, chief executive of the Confederation of British Industry, said: “A cool and calm reaction from the UK Government is the right response: UK firms need a measured and proportionate approach which avoids further escalation. Retaliation will only add to supply chain disruption, slow down investment, and stoke volatility in prices.”
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