Global stock markets took a significant hit on Thursday after President Donald Trump unveiled an aggressive set of tariffs on US trading partners, far surpassing expectations. The move, seen as a full-blown assault on the global trade order, triggered a sharp sell-off, particularly in export-focused companies, and sent shockwaves through financial markets worldwide.
In Europe and Asia, market reactions were swift and severe. The Stoxx Europe 600 index dropped 1.3% in early trading, while Japan’s Topix index closed 3.1% lower. Hong Kong’s Hang Seng index also fell by 1.5%, as traders reacted to the news of Trump’s latest tariff policies. The UK’s FTSE 100 and Germany’s DAX indices followed suit, declining by 1.1% and 1.4%, respectively.
In the US, stock futures pointed to a daunting 2.8% opening drop for the S&P 500, compounding the challenges for Wall Street, which had already been in a correction this year, largely due to Trump’s ongoing tariff threats and a downturn in the tech sector.
The sharp declines were triggered by the announcement of sweeping tariffs, including a 10% tariff on nearly all US imports, a 20% levy on goods from the European Union, and a 34% tariff on Chinese goods. These new measures come on top of previous tariffs that have already created tension in global trade.
“It’s worse than expected, there’s no sugar-coating it,” said Zhikai Chen, head of global emerging market equities at BNP Paribas Asset Management. His sentiment echoed through the market as investors digested the impact of the tariffs.
The US dollar also took a significant hit, falling 1.4% against a basket of other currencies—its worst performance in the past year—amid growing concerns over the long-term effects on the US economy. In contrast, the Japanese yen rallied 1.5%, as traders sought safety in the face of a weaker dollar.
Chinese tech giants, including Alibaba and Tencent, alongside major exporters like BYD, were among the hardest hit. The escalating trade tensions have put these companies on edge as they brace for more disruption in their global supply chains.
In a sign of investor unease, government bonds surged as traders flocked to safer assets. The yield on 10-year US Treasury bonds fell by 0.12 percentage points to 4.07%, as the price of the bonds surged. Traders are now betting on three to four quarter-point interest rate cuts from the Federal Reserve to help mitigate the economic fallout from the tariffs, up from the three cuts implied by swaps markets just one day earlier.
Meanwhile, gold prices saw significant volatility. After surging to a record high during Asian trading, the price of gold fell back to $3,154 per troy ounce. The commodity’s brief spike reflected investors’ initial response to the news, seeking the traditional safe-haven asset. Other economically sensitive commodities also took a hit, with Brent crude oil prices falling 3% in response to the increased trade uncertainties.
The tariff announcement is widely expected to lead to a period of intense negotiation, but Deutsche Bank’s Jim Reid warned that investors may have been “too optimistic” about earlier comments from Treasury Secretary Scott Bessent, who had suggested that the initial levies would serve as a cap. Instead, markets are now bracing for the possibility of retaliatory measures.
“We’re definitely looking at a ‘retaliation day’ after Trump’s ‘liberation day,’” said one European fund manager, as the prospect of further trade tensions looms.
“Definitely it’s more dramatic than expected,” commented Ding Shuang, chief Greater China economist at Standard Chartered. “Even for China, the additional [tariff] increase is higher than expected.”
UBS Global Wealth Management’s chief investment officer, Mark Haefele, also weighed in on the broader economic impact. He warned that even if tariffs were reduced by the end of the year, the immediate shock would likely lead to a slowdown in the US economy. “This uncertainty is likely to drive a near-term slowdown in the US economy and reduce full-year 2025 growth to closer to or below 1%,” Haefele predicted.
As markets struggle to adjust to the full impact of President Trump’s latest tariffs, the coming weeks will likely see continued volatility and growing concern about the economic fallout from this unprecedented shift in US trade policy.
