World stocks, the US dollar and oil all tumbled yesterday as US President Donald Trump’s drastic new tariffs drove widespread fears of a global recession and left investors seeking safe-haven bonds and the yen.
A new baseline 10 percent tariff on imported goods, plus some eye-watering additional “reciprocal” tariffs on dozens of countries Trump said had unfair trade barriers, left traders clearly rattled by their severity.
In Europe, where the 27-country EU bloc now faces a 20 percent reciprocal levy, bourses lurched between 1.3 percent and 2 percent lower as Brussels and other capitals voiced uproar.
Photo: Reuters
Wall Street futures were down 3 percent ahead of what was expected to be a turbulent US restart later. The US dollar’s 2 percent plunge had it heading for its worst daily drubbing since November 2022.
In Asia, where some of the harshest tariffs had been focused, Tokyo dropped 2.8 percent to leave it facing its worst week in nearly two years.
Hong Kong, Sydney, Seoul, Manila, Mumbai, Shanghai and Singapore also fell, while Wellington managed to eke out a small gain as New Zealand faced smaller tariffs. Taipei was closed for holidays.
Analysts at JPMorgan Chase & Co said the tariffs were “significantly higher than the realistic worst-case scenario” that had been envisaged.
Fitch Ratings warned the tariffs were a “game-changer” for the US and global economy, while Deutsche Bank AG called them a “once in a lifetime” moment that could easily knock between 1 percent and 1.5 percent off US growth this year.
“Many countries will likely end up in a recession,” Fitch Ratings’ US Economic Research head Olu Sonola said. “You can throw most forecasts out the door if this tariff rate stays on for an extended period of time.”
The scramble for ultra-safe government bonds that provide a guaranteed income drove US Treasury yields down toward 4 percent and Germany’s 10-year yield, the European benchmark borrowing rate, went 8.5 basis points lower to 2.64 percent.
The sweeping new tariffs would raise effective import taxes in the world’s largest economy to the highest levels in a century. If they do trigger recessions, central banks around the world are likely to slash interest rates which benefits bonds.
The risk-sensitive Australian dollar also fell, as it was hit as well, and with China, Canada and Europe all promising countermeasures, investors were selling exposure to global growth.
Oil, a proxy for economic activity, dropped as much 4 percent in London to push Brent back below US$72 a barrel and firmly on course for its worst day of the year so far.
Gold hit a record high above US$3,160 an ounce before running out of steam, while the yen jumped more than 1.5 percent to ￥147.01 per US dollar, as foreign exchange traders looked for safety outside the greenback.
The Swiss franc, another traditional safety play, touched its strongest level in four months as the euro surged 2 percent to US$1.10.
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