Stock markets across Europe slumped on Monday after Donald Trump said foreign governments would have to pay “a lot of money” to lift sweeping tariffs that he characterised as “medicine”.
Speaking to reporters onboard Air Force One late on Sunday, the US president indicated he was not concerned about market losses that have already wiped out nearly $6tn (£5tn) in value from US stocks. “I don’t want anything to go down. But sometimes you have to take medicine to fix something,” he said.
Trump’s comments triggered a mass sell-off on Asian stock markets overnight and prompted the billionaire investor Bill Ackman, one of the US president’s backers in the 2024 race for the White House, to call for a moratorium, saying that sweeping tariffs “on our friends and our enemies alike” had caused an “economic nuclear war”.
In Europe, stock markets plunged in early trading on Monday. The FTSE 100 fell as much as 6%, before recovering slightly to a fall of 4.38% by the end of the day, while Germany’s Dax and France’s CAC 40 also ended the day down more than 4%.
On the FTSE 100, the industrial groups Babcock, Rolls-Royce and Melrose were among the biggest fallers, as well as investment companies and Barclays Bank, which has large operations in the US, as concerns over a tariff-induced global recession continued to rip through markets.
Overnight, Japan’s benchmark Nikkei 225 index tumbled 8%, and Hong Kong and Chinese stocks also dived, with Hong Kong’s Hang Seng index down 12%. Shares in the Chinese tech companies Alibaba and Tencent fell more than 8%. In South Korea, trading on the Kospi index was halted for five minutes at 9.12am as stocks plummeted.
In Taiwan, the market fell almost 10%, the largest one-day point and percentage loss on record. Falls were driven by the tech companies TSMC and Foxconn, triggering circuit breakers.
More than $160bn was wiped off the Australian stock markets.
Oil prices sank, continuing a trend over the last week. Brent crude fell by more than $10 to $63.84, sending shares in oil majors sliding down. BP, which has lost two-fifths of its value over the past year, tumbled another 5% and Shell lost almost 6%.
After falling over the last week, gold rose slightly to $2,362. Gold has proved to be a safe haven asset during the coronavirus pandemic and the war in Ukraine, doubling its value since 2020.
Investors also reacted to the prospect of deeper interest rate cuts on Monday. Traders increased their predictions for UK rate cuts, pricing in three quarter-point drops in the UK, from 4.5% to 3.75% with a 90% expectation of a cut in May, while the Bank of Japan, which has been increasing interest rates, was expected to pause.
Trump said he had spoken over the weekend to leaders from Europe and Asia, who hope to convince him to lower tariffs that are as high as 50% and due to take effect this week. “They are coming to the table. They want to talk but there’s no talk unless they pay us a lot of money on a yearly basis,” Trump said.
Trump’s tariff announcement last week jolted economies around the world, triggering retaliatory levies from China and sparking fears of a global trade war and recession. On Sunday morning talkshows, Trump’s top economic advisers sought to portray the tariffs as a savvy repositioning of the US in the global trade order. They also tried to minimise the economic shocks from last week’s tumultuous rollout.
The US Treasury secretary, Scott Bessent, said more than 50 nations had started negotiations with the US since last Wednesday’s announcement.
Bessent said there was “no reason” to anticipate a recession, citing stronger-than-anticipated US jobs growth last month, before the tariffs were announced.
The US president spent the weekend in Florida, playing golf and posting a video of his swing to social media on Sunday.
US customs agents began collecting Trump’s unilateral 10% tariff on all imports from many countries on Saturday. Higher “reciprocal” tariff rates of 11% to 50% on individual countries are due to take effect on Wednesday at 12.01am eastern daily time.
Some governments have already signalled a willingness to engage with the US to avoid the duties.
In his first significant intervention since the US ushered in a new economic era last week, the UK prime minister, Keir Starmer, said the government would step in to support key British industries.
He is to announce plans to give carmakers more flexibility over how they meet a target to stop sales of new petrol and diesel cars by 2030. Other sectors to be hit by Trump’s tariffs are expected to receive support later in the week, with life sciences likely to be among them.
Paul Donovan, the chief economist at UBS Global Wealth Management, said uncertainty was another factor dragging down markets after US administration officials gave contradictory statements “causing investors to question the existence of a master plan”.
He said: “Investors had assumed Trump’s trade taxes were a bargaining tool, as during the first term. That depends on competent policymaking to balance the benefits of trade negotiations against the damage of tariffs.
“If the competence of policymaking is questioned, markets will worry that economic damage will be lasting”
A search for safe havens benefited European and other industrialised nations, and the value of their bonds rallyied and the cost of borrowing fell.
The two-year gilt yield, which is a proxy for the interest rate, fell to its lowest since September 2024 at 3.814%, down 12 basis points (bps) on the day, while 10-year yields sank to their lowest since December at 4.379%, down 6 bps, before recovering to be 3 bps lower.
“With Europe facing both recession and disinflation from global trade disruption, we suspect ECB/BoE terminal rate pricing can shift lower still,” market strategists at the US bank Citi wrote in a note to clients.
Goldman Sachs increased its predictions for a US recession over the next 12 months, from a 35% chance to 45%.
Tariff-stunned markets face another week of potential turmoil after the worst week for US stocks since the onset of the Covid-19 crisis five years ago.
The White House economic adviser Kevin Hassett denied the tariffs were part of a Trump strategy to crash financial markets to pressure the US Federal Reserve to cut interest rates. He said there would be no “political coercion” of the central bank.
