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Stocks fell in Europe and the US on Tuesday, following President Donald Trump’s implementation of tariffs on Washington’s trading partners, sparking concerns about the global economy.
European markets experienced significant declines amidst worries that the continent’s goods could be the next target of US tariffs. Germany’s Dax index plummeted 3.5%, marking its worst performance in three years, with exporters like Continental and Daimler Truck bearing heavy losses. The Stoxx Europe 600 also dropped by 2.1%.
Trump’s 25% tariffs on imports from Mexico and Canada went into effect on Tuesday, leading to backlash from the US’s neighboring countries and fueling fears of a potential trade war.
Additionally, the White House imposed an extra 10% tariff on Chinese goods, in addition to last month’s 10% tariff, heightening worries about a global economic slowdown due to the president’s protectionist actions.
Alain Bokobza, head of global asset allocation at Société Générale, commented, “A global trade war is a lose-lose situation for everyone. Some may lose more than others, but overall, everyone will suffer.”
In the US, the S&P 500, which recently hit a record high, dropped 1% to 5,790.24 points by early afternoon, erasing all gains made since Trump’s election victory on November 5.
The US stock market has faced significant challenges in recent days, contrasting with the post-election rally that followed Trump’s pledge to lower corporate taxes. The index has fallen by 6% over the past two weeks as concerns over tariffs and weak economic data have dampened investor confidence.
Steven Grey, chief investment officer at Grey Value Management, remarked, “This is the result of a market that was expecting perfection, now grappling with the reality of tariffs and economic slowdown.”
Trump’s tariffs against the US’s major trading partners have raised duties to levels unseen in decades, with the possibility of further escalations as tensions mount.
Canadian Prime Minister Justin Trudeau dismissed Trump’s justification for the tariffs related to fentanyl trafficking as “completely baseless,” suggesting that the real motive behind the tariffs was to destabilize the Canadian economy for easier annexation. Trudeau announced retaliatory measures, including an immediate 25% tariff on C$30bn (US$21bn) worth of US imports and additional tariffs on C$125bn of US goods 21 days later.
Ontario, Canada’s most populous province, revealed plans to terminate its contract with Starlink, Elon Musk’s internet satellite provider, and bar US companies from government contracts. It also announced a ban on the sale of US-made alcoholic beverages.
While Mexico is set to unveil countermeasures on Sunday, China declared a 10-15% tariff on various US agricultural products, including soybeans, beef, corn, and wheat, effective from March 10.
Prior to this week’s tariffs, certain US economic indicators hinted at potential challenges ahead.
A survey by the American Association of Individual Investors revealed a significant drop in investor confidence towards the end of February, nearing an all-time low, while the Federal Reserve Bank of Atlanta’s latest estimate of US GDP growth, published on Monday, projected a 2.8% decline in the first quarter.
Bank stocks, being sensitive to economic uncertainties, faced notable declines on Tuesday, with the KBW Bank index down by 4.2%. Citigroup and Bank of America recorded a 5.6% drop, Morgan Stanley lost 4.9%, and Goldman Sachs shed 3.6%.