Stock markets are tumbling around the world today as shocked investors react to the “Liberation Day” tariffs unveiled by President Trump at the White House last night.
In London the FTSE-100 index of leading British companies opened down 118.1 points, or 1.37% at 8,490.38 after it was confirmed that all UK goods exports to the US will be hit with a 10% levy, except steel, cars and cars parts which attract a 25% tariff.
While that is lower than the 20% tariff hit suffered by the European Union, it still represents a huge threat to £60 billion of exports to Britain’s biggest single national trading partner, from Scotch whisky to vital chemicals.
Leading European stock markets saw bigger falls of more than 2%.
Meanwhile the pound rose more than a cent against the dollar to just over $1.31, the highest level since last October, on fears that the US economy could fall into recession.
Nevertheless Keir Starmer warned business chiefs this morning that “clearly there will be an economic impact from the decisions the US has taken, both here and globally.”
Duncan Edwards CEO of transAtlantic trading association BritishAmerican Business, which represents 450 exporters in the UK and USA, said:“BritishAmerican Business members will be disappointed to see that new tariffs are being imposed on imports from Britain and elsewhere into the USA.
“The 10% general tariff is unhelpful but is significantly lower than many had feared and than has been imposed on many other major US trading partners, including the EU.
“The steel and car tariff rates are also confirmed and for UK car exporters in particular, the 25% tariff is going to be a blow.
“On a more positive note, the door is very clearly open for the UK government to continue the good work it has been doing in Washington to try to reach an agreement with the US. Our hope is that an agreement can be reached soon resulting in lower tariff and non-tariff barriers for both countries.”
The steep fall in the City’s stock markets followed a dramatic night on Asian bourses as investors grappled with the implications of a tariff regime on a scale not seen since the 1930s - with more rounds of retaliation and counter measures still to come.
In Japan – which was hit with a 24 per cent tariff – the Nikkei 225 index initially slumped more than 4 per cent on opening, though it recovered slightly to close at 34,622.27, down 1,103.60, or just over 3%.
South Korea was hit with a 25 per cent tariff and its benchmark Kospi slumped 1.5 per cent to 2,468.97 while Hong Kong’s Hang Seng lost 1.4 per cent.
Roman Ziruk, senior market analyst at global financial services firm Ebury said: “Trump’s “Liberation Day” announcements landed at the very negative end of market expectations, with the average tariff rate rising to over 20% from just 2.5% before Trump took office, the highest level since the early 20th century.
“Asian countries were hit the hardest, with some seeing punishing reciprocal tariffs of over 40% and China being hit with a massive 34% levy on top of the 20% already imposed since the start of Trump’s second term.
“On the other side of the spectrum are the UK and major Latin American countries, which were slapped with at most a 10% duty, with the EU in the middle at 20%.”
Barret Kupelian, chief economist at PwC, said: “Liberation Day’ may sound like a celebration, but for global trade, it marks a turning point. It is a significant disruption to the international trading system. The UK avoided a direct blow—but the global economy has taken a substantial hit.
“For the UK, the impact is significant—though less severe than for some other countries. We export around £60 billion in goods to the US, including pharmaceuticals, cars, and high-tech equipment. Not all sectors will be hit equally: car exports will face higher tariffs.
“In the short term, businesses face a sharp rise in uncertainty. The one silver lining is that the retaliatory tariff rate applied to the UK is the lowest among affected countries. Our European trading partners will face steeper tariffs, though some of that economic pain will inevitably spill over to UK firms through supply chains and shared markets.
“Once the dust settles, we are likely to see renewed efforts to negotiate new trading terms with the US. But in the medium to long term, businesses can no longer rely on trade being predictable or stable. Strategic shifts—in sourcing, pricing and risk planning will follow.
“This is a significant pivot to power-based trade. The rules-based motorway is turning into a winding country road—resilience, not speed, will define success in this new terrain.”
Daniel Murray, Deputy CIO & Global Head of Research at EFG, a global private banking group headquartered in Zurich, Switzerland, said: “The risk of a US and global recession has increased directly as a result of the US tariffs, as has the likelihood that inflation stays higher for longer. In turn, the possibility of stagflation makes life very difficult for central banks. Immediately following the tariff announcement, Treasuries rallied as part of the risk-off trade.
“However, the medium term path for Treasuries is far more uncertain due to the upward pressure on prices that is expected to follow tariff implementation. As was seen in 2022 and 2023, when faced with a choice between fighting inflation and supporting the economy, central bankers place greater weight on the former, at least in the short term, for fear that if inflation becomes embedded the longer term consequences are even more painful.”
