The stock market rout in reaction to Donald Trump’s imposition on tariffs with trading partner around the globe continued into Monday, with markets in Europe and Asia continuing to slide.
Euronext Dublin and other European stock exchanges were a sea of red as investors pulled money out of risk-sensitive assets after Mr Trump and his officials showed no signs of backing down on controversial measures announced last week.
Returning from a weekend golf trip on Sunday evening, Mr Trump said markets would have to take their “medicine”.
“We have large Financial Deficits with China, the European Union, and many others,” he wrote on Truth Social. “The only way this problem can be cured is with TARIFFS, which are now bringing Tens of Billions of Dollars into the U.S.A. They are already in effect, and a beautiful thing to behold.”
In Dublin, the Iseq All Share Index shed just over 4 per cent while Europe’s STOXX 600 closed at its lowest since January, 2024. In London, the blue-chip FTSE 100 index dropped 4.4 per cent, its weakest closing level in over a year.
More broadly, equities fell heavily while haven currencies rose and bond yields declined.
Shortly before the closing bell in Europe, Mr Trump threatened to impose an additional 50 per cent tariff on China unless Beijing withdraws a 34 per cent retaliatory duty on US goods.
He also vowed to abandon talks with China, indicating he is in no mood to back down in his trade conflict despite the huge sell-off in stock markets. In the event, officials in Washington said no talks were ongoing or scheduled.
Mr Trump said that negotiations with other countries would start immediately. He held a call with Japan’s prime minister Shigeru Ishiba on the issue, while European Commission president Ursula von der Leyen said the bloc is ready to negotiate with the US on tariffs.
Monday’s heavy falls came as Goldman Sachs raised the probability of a US recession from 35 per cent to 45 per cent in the wake of “a sharp tightening in financial conditions”.
It followed the havoc of Thursday and Friday when more than $5 trillion was erased from the S&P 500, capping the worst week for the index since the onset of the coronavirus pandemic in 2020.
Mr Trump took to social media on Monday to call on the US Federal Reserve to cut interest rates. “The slow moving Fed should cut rates,” he said.
The market turmoil followed what the US president dubbed “liberation day” last week when he imposed duties of more than 40 per cent on some of America’s biggest trading partners, quickly prompting China to announce its retaliatory duties.
European trade ministers, including Tánaiste Simon Harris, met in Luxembourg on Monday to discuss the bloc’s response, which is considered likely to include additional tariffs on US goods imports to the EU.
The tit-for-tat moves have raised the spectre of a lengthy global trade war between the world’s largest trading blocs that could severely hamper growth, sparking a global recession.
Oil prices slid 2 per cent to a nearly four-year low on Monday. The session was marked by extreme volatility with intraday prices down more than $3 a barrel overnight and up over $1 on Monday morning on reports the White House called “fake news” that Trump was considering a 90-day pause on tariffs for all countries except China.
During Asia’s earlier trading session, a closely-watched gauge of Chinese shares listed in Hong Kong tumbled about 14 per cent, putting it into a bear market. Hong Kong’s Hang Seng index had its worst day since 1997.
China’s retaliation against Mr Trump’s sweeping tariffs is forcing investors to confront the reality that a much-feared trade conflict has entered a new phase.
Beijing has tried to limit the damage: officials are discussing front-loading potential stimulus to offset the impact of tariffs and a state-backed fund said it had increased its investments in exchange-traded funds to stabilise the market – but so far, investors are focusing on the potential for economic disaster. – Additional reporting: Bloomberg, Financial Times
