International stock markets took a significant hit overnight as worries about a global trade war escalated following President Donald Trump’s announcement of new tariffs. Trump referred to these tariffs as "medicine," suggesting they are necessary for fixing economic issues.
In Asia, Japan’s Nikkei 225 index plummeted nearly 8%, while Australia’s S&P/ASX 200 dropped over 6%. South Korea’s Kospi also fell, losing 4.4%. Meanwhile, US stock market futures indicated further declines, with the S&P 500 futures down 4.2%, the Dow Jones Industrial Average down 3.5%, and the Nasdaq futures down 5.3%.
Trump warned that foreign governments would face hefty costs to lift the tariffs, which he characterized as a necessary remedy. "I don’t want anything to go down. But sometimes you have to take medicine to fix something," he stated while traveling on Air Force One.
Over the weekend, Trump spoke with leaders from Europe and Asia who were eager for him to reconsider the tariffs, which are set to take effect this week. He emphasized that the U.S. will not tolerate trade deficits, stating, "We’re not going to do that because to me, a deficit is a loss."
As the tariffs began to be enforced, US customs agents started collecting a 10% tax on imports from various countries. Additional tariffs, ranging from 11% to 50%, are expected to be implemented soon. These measures have sparked fears of retaliation, particularly from China, and raised concerns about a potential global recession.
Investors and political leaders are uncertain whether these tariffs are a long-term strategy or merely a negotiating tactic. The impact has already been felt, with significant drops in stock values and concerns about the broader economy.
In the UK, KPMG warned that these tariffs could slow GDP growth to just 0.8% in the coming years. The firm noted that the increased tariffs on cars, aluminum, and steel would outweigh any benefits from exemptions on pharmaceutical exports.
Yael Selfin, KPMG’s chief economist, highlighted the urgency for a negotiated settlement to avoid the negative economic effects of the tariffs, particularly for the UK’s automotive sector, which relies on intricate supply chains.
The situation remains fluid as global markets react to Trump’s aggressive trade policies. The coming days will be crucial in determining how countries respond and whether negotiations can ease the rising tensions.