Global markets took a hit on Thursday after President Trump declared a sweeping 10% tariff on all U.S. trading partners, sparing only Canada and Mexico. In addition, he announced steeper tariffs on a wide range of America’s key trading partners.
The fallout was immediate, with S&P 500 futures, which enable investors to trade the index beyond regular trading hours, plummeting over 3%. Across Asia, markets reacted sharply; Japan’s benchmark indices dropped more than 3%, while those in Hong Kong and South Korea saw nearly 2% declines.
This downturn followed Trump’s Wednesday address at the White House, where he outlined a new baseline tariff of 10% on all imports, along with targeted taxes on specific countries. These measures include a whopping 34% tariff on Chinese goods, in addition to the 20% tariffs already in place, a 20% tariff on goods from the European Union, and a 24% tariff on Japanese imports.
The initial market response indicated the tariffs’ magnitude surprised many, with analysts still puzzling over the rationale behind these figures.
“The numbers are shockingly high, and it’s quite inexplicable,” remarked Peter Tchir, head of macro strategy at Academy Securities. “It feels like a disaster in the making.”
The administration claims they adjusted the tariffs to counter alleged currency manipulation and other taxes. However, analysts are skeptical about the validity of these calculations.
“Trump has essentially declared a trade war,” said Andrew Brenner from National Alliance Securities, critiquing the move as ill-conceived and damaging to both the U.S. and global economies.
In recent weeks, global stock markets have experienced volatility amidst mixed messages from the administration regarding tariffs. Earlier this week, Asian markets took a hit before Trump’s announcement, with Japan’s Nikkei 225 entering correction territory on Monday.
Japan, especially shaken by the new 24% tariff on its products, had been hopeful that its generally low tariffs might shield it from harsh penalties. However, Japanese business leaders were caught off guard by Trump’s announcement.
The unpredictability surrounding the tariffs has left investors struggling to understand potential impacts on consumers, businesses, and the broader economic landscape.
According to Olu Sonola of Fitch Ratings, the U.S. tariff rate on imports now averages around 22%, a dramatic increase from 2.5% in 2024. This is a level not seen since the early 20th century, he noted.
“This is a seismic shift, affecting both U.S. and global economies,” Sonola emphasized, predicting many countries might face recessions. “We can forget about most forecasts now.”
The S&P 500 has diminished by 7.7% from its recent February high, with declines in 10 of its 11 sectors from February through March.
The tech-heavy Nasdaq Composite has faced even steeper losses, dropping almost 13% since peaking in December. By Wednesday evening, its futures had fallen over 4%.
Meanwhile, the Russell 2000 index, reflective of smaller firms more sensitive to economic changes, has fallen over 16% since November’s peak.
Asian stocks, particularly in technology and automotive sectors, have stumbled as well. Shares of Toyota and Samsung Electronics experienced declines of over 5% and nearly 3% respectively on Thursday.
Japan’s Nikkei 225 is down more than 13% this year. Analysts are wary of the effects of a weaker dollar and stronger yen, alongside tariffs, on Japanese exporters’ profits.
Adding to these concerns is the surge in gold prices. The precious metal climbed 19% in the year’s first quarter, marking its largest quarterly gain since 1986, as investors seek safe havens.
Despite fears of tariffs fueling inflation, decreasing bond yields and a sliding U.S. dollar suggest more significant concerns about slowing economic growth prevail.
As Trump addressed the nation from the White House Rose Garden, the dollar slipped. Many investors had hoped the tariff announcement might ease market uncertainties. However, no one expected it would conclude Trump’s tariff strategy or stabilize stock market fluctuations.
“Uncertainty has essentially put a freeze on investors, consumers, and business leaders,” said George Goncalves of MUFG Securities, pointing to its dampening effect on economic activity.
Even before the announcement, the equity options market signaled expectations of continued volatility, according to Mandy Xu of Cboe Global Markets.
“Tariffs are no longer seen as a one-off risk but a perpetual one,” she noted, emphasizing that the market anticipates ongoing turbulence amid persistent concerns over tariffs and economic growth.
