Global stock markets and oil prices fell, as President Donald Trump’s dramatic US trade tariffs sparked widespread fears about the global recession, causing investors to be shattered by the relative security of gold and yen on Thursday.
In addition to the new baseline 10% tariffs on imports, the additional “mutual” tariffs that distract the country that Trump says has placed a high trade barrier on the US has been clearly rattling.
In Europe, where the 27-country EU bloc is currently facing mutual collection of 20%, it was lowered early by 1.3% to 2% as Brussels and other capitals in the region are in turmoil.
Tokyo’s Nikkei Index beat 2.7% overnight in Asia, leaving the course in the worst week of nearly two years. Wall Street futures fell 3%, while the US dollar fell more than 1% to a six-month low.
Analysts at JPMorgan said tariffs were “significantly higher than the worst realistic scenario.”
Credit rating agency Fitch warned that they were a “game changer” for both the US and the global economy, and Deutsche Bank called them a “once in a lifetime” event where you can easily knock US growth this year at 1%-1.5% off.
“Many countries will probably be in a recession,” said Fitch’s Or Sonora. “If this tariff rate is ongoing for a long time, you can throw away most forecasts through the door.”
The scramble of ultra-safe government bonds offering guaranteed revenues reduced the US Treasury yield to 4%, while the benchmark borrowing rate in Europe, a 10-year German bond yield, fell by 8.5 basis points.
Cleaning fees raise effective import taxes in the world’s largest economy to the highest level in a century. If they cause a recession, central banks around the world could cut interest rates that would benefit bonds.
Nasdaq futures fell 3.2% more than expected as a turbulent US reboot.
Apple’s market capitalization fell more than $240 billion as stocks slide 7% in after-hours trading on Wednesday. Nvidia’s market capitalization has dropped by 5.6% or $153 billion, and this year it has already wiped out the “magnificent seven” tech giants.
Trump’s taxation has hit Asia particularly hard.
China was slapped with 34% collection, with Japan winning 24%, South Korea winning 25% and Vietnam 46%. Vietnamese stocks fell 6.7% accordingly. Australian stocks and Australian dollars also fell as the country was hit.
Investors were selling exposure to global growth as countries from China and Canada to Europe all imposed promising measures.
Oil, a proxy for economic activity, has reverted benchmark Brent futures to under $73 a barrel, dropping 3% on the course on the worst day of the year.
Gold hit record highs before running out of steam above $3,160 per ounce, and the Japanese yen jumped over 1.5% to $147.01 as it searches for safety outside the US dollar.
Another traditional safe play, the Swiss franc, touched on the strongest level in four months as the euro also rose 1% to $1.0970.
“We’re committed to providing a range of services to our customers,” said Adam Hetts, global head of multi-asset and portfolio manager at Janus Henderson Investors.
China has relatively stable currency, and despite a total tariff over 50% on Chinese exports and a hit to Vietnam, the yuan decline has fallen to around 0.4%, and is considered to be shutting down popular avoidance routes.
China’s massive domestic economy and hopes for support from Beijing have brought Hong Kong stock losses to about 1.5% and Shanghai’s losses to about 0.5%.
“The key focus for the next few days clearly needs to be China,” said George Saravelos, a strategist at Deutsche Bank.
“Is China happy to wait for trade negotiations or absorb this?” he said. “Or does it try to “export” the shock through devaluation of the yuan? ”