Investors dive for cover as eye-watering Trump tariffs skittle stocks

LONDON, April 3 — World stock markets and oil prices tumbled and investors dashed to the relative safety of bonds, gold and the yen today, as President Donald Trump’s drastic US trade tariffs stirred widespread fears of a global recession.

A new baseline 10 per cent tariff on imported goods plus some eye-watering additional ‘reciprocal’ tariffs on countries Trump said put high trade barriers on the US, left traders clearly rattled.

In Europe, where the 27 country EU bloc now faces a 20 per cent reciprocal levy, bourses lurched between 1.3 per cent and 2 per cent lower early on as Brussels and other capitals in the region were left in uproar.

Tokyo had slumped 2.7 per cent in Asia overnight to leave it on course for its worst week in nearly two years. Wall Street futures were down 3 per cent, while the dollar dropped more that 1 per cent to a six-month low.

Analysts at JPMorgan said the tariffs were, “significantly higher than the realistic worst-case scenario” they have been envisaging.

Credit rating agency Fitch warned they were a “game-changer” for both the US and global economy, while Deutsche Bank called them a “once-in-a-lifetime” event that could easily knock between 1 per cent-1.5 per cent off US growth this year.

“Many countries will likely end up in a recession,” Fitch’s 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 towards 4 per cent and Germany’s 10-year yield, the European benchmark borrowing rate, went 8.5 basis points lower to 2.64 per cent.

The sweeping tariffs will 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.

Nasdaq futures were down 3.2 per cent ahead of what was expected to be a turbulent US restart.

Apple’s market capitalisation had dropped by more than US$240 billion (RM1 trillion) as its shares slid 7 per cent in after-hours trade yesterday. Nvidia’s market cap dropped 5.6 per cent or US$153 billion, adding to the trillions wiped off the ‘Magnificent Seven’ tech giants already this year.

Trump levies hit Asia particularly hard.

China was slapped with a 34 per cent levy, Japan got 24 per cent, South Korea 25 per cent and Vietnam 46 per cent. Vietnamese stocks tumbled 6.7 per cent in response. Australian shares and the Aussie dollar also fell as the country was hit too.

China focus

With countries from China and Canada to Europe all promising countermeasures, investors were selling exposure to global growth.

Oil, a proxy for economic activity, dropped as much 3 per cent to put benchmark Brent futures back below US$73 a barrel and 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 Japan’s yen jumped more than 1.5 per cent to 147.01 per dollar as foreign exchange traders looked for safety outside the US dollar.

The Swiss franc, another traditional safety play, touched its strongest level in four months as the euro jumped 1 per cent too to US$1.0970.

“Eye-watering tariffs on a country-by-country basis scream ‘negotiation tactic’, which will keep markets on edge for the foreseeable future,” said Adam Hetts, global head of multi-asset and portfolio manager at Janus Henderson Investors.

China held its currency relatively steady, containing the yuan’s drop to about 0.4 per cent despite total tariffs of above 50 per cent on Chinese exports and the hit to Vietnam seen as shutting down a popular work-around route.

China’s big domestic economy and the hope of support from Beijing limited losses in Hong Kong stocks to about 1.5 per cent and in Shanghai to around 0.5 per cent.

“The key focus over the next few days should clearly be China,” said Deutsche Bank strategist George Saravelos.

“How willing will China be to wait for trade negotiations ... or to absorb this?” he said. “Or will it try to ‘export’ the shock ... via a devaluation of the yuan.” — Reuters