Trump’s tariffs trigger global market downturn

The market collapse, triggered by US President Donald Trump’s tariffs, deepened on Monday after the President signaled he would not back down from aggressive trade policies despite growing fears of a global recession.

Stocks fell sharply, while currencies rose and bond yields declined. Contracts tracking the S&P 500 fell by 3.2%, while those for the Nasdaq fell by 4.1%. Asian stocks were shaken, with Hong Kong’s Hang Seng index falling by more than 10%.

European stocks declined at the opening on Monday, with the Stoxx Europe 600 index falling by 6.2% and Germany’s Dax index falling by 10%. The index in Frankfurt fell by around 9%, while the share value of the German arms company Rheinmetall, whose shares soared with the war in Ukraine, is heading towards disaster with a 27% decrease.

The heavy declines came as Goldman Sachs raised its probability of the US entering a recession from 35% to 45% following “a sharp tightening in financial conditions” after Trump imposed sweeping tariffs on US trading partners last week.

Trump said on Truth Social on Sunday night, “We have large financial deficits with China, the European Union, and many other countries. The only way to solve this problem is with TARIFFS, which are now making the US Tens of Billions of Dollars… They are already in place and a beautiful thing to see.”

When Trump was asked by reporters about the market declines, he said, “Sometimes you have to take medicine in order to fix something.”

More than $5 trillion was erased from the S&P 500 index on Thursday and Friday, capping off the worst week for the index since the start of the coronavirus pandemic in 2020.

As markets fell, even supporters of the US President voiced concerns about the White House’s trade agenda. On Sunday, billionaire investor Bill Ackman wrote on X, “By imposing large and disproportionate tariffs on both our friends and our enemies… we are in the process of destroying confidence in our country as a trading partner.”

Ackman also attacked Commerce Secretary Howard Lutnick for being “indifferent to the collapse of the stock market and the economy,” claiming that Lutnick and his company, Cantor Fitzgerald, make money by holding fixed-income assets.

The price of safe-haven bonds, such as US Treasury bonds, had risen during the stock selloff over the past few days. Ackman said that Lutnick “profits when our economy collapses.”

Billionaire hedge fund investor Stanley Druckenmiller also expressed his opposition to Trump’s tariff regime, saying on X, “I am not in favor of tariffs over 10%.”

The benchmark 10-year US Treasury yield, closely watched by Trump administration officials, fell 0.08 percentage points to 3.91% on Monday as investors globally flocked to bonds.

Japan’s 10-year JGB yield fell 0.07 percentage points to 1.11%, while China’s 10-year yield fell 0.09 percentage points to 1.64%.

Two global banks based in London took a heavy hit. Shares of HSBC and Standard Chartered both fell about 16% in Hong Kong trading.

According to Bloomberg Intelligence, their exposure to emerging markets and recent strategic pivot to Asia makes these banks particularly vulnerable to a trade war.

Commodities also continued to suffer heavy losses, with West Texas Intermediate, the benchmark for US oil prices, falling 3.4% to $59.80 a barrel. International benchmark Brent crude fell 3.4% to $63.35.

LME copper, widely seen as a bellwether for growth due to its industrial use, fell more than 7% to $8,690 a ton. Bitcoin fell 0.8% to $78,198 a token.

The US dollar fell 0.3% against a basket of its largest trading partner currencies, while the Japanese yen rose 0.8% to 145.6 yen per dollar. Chinese authorities set the offshore renminbi at its weakest level since early December at 7.19 Rmb per dollar.