Live: Trump’s steep tariffs are rocking markets and reshaping alliances. Follow the latest updates.

Morning Bid: Trepidation Day

FILE PHOTO: Cargo ships at the port of Oakland, California · Reuters

LONDON – President Donald Trump’s move to impose sweeping tariffs on U.S. imports from allies and rivals alike sparked threats of retaliation on Thursday. Markets are reeling after the new tariffs sent shockwaves through the financial world, with the dollar and U.S. stocks among the hardest hit on fears that a broadening trade war will unleash a recession.

“All this work for nothing.” Trump’s global tariffs are creating an all-round blockade that is hurting Chinese businesses, large and small. This latest round of tariffs will sap yet more vigor from a world economy that has barely recovered from the post-pandemic inflation surge and is weighed down by record-high debt and unnerved by geopolitical strife.

He calls it “Liberation Day”, but Trump’s gamble on global tariffs could cause political headwinds for his party and economic pain for his constituents if his promises to recast the economy do not work out.

Trepidation Day

Some thought Wall Street would embrace the much-hoped for clarity offered by Trump’s tariff announcement, but they were wrong. Wall Street stock futures have plummeted more than 3% overnight on the combination of a 10% universal tariff on all U.S. imports and reciprocal tariffs on top of that for many countries, heavily concentrated in China and Asia. China now faces a combined 54% tariff rate when factoring in earlier moves.

European Union imports are set to be hit with 20% tariffs, with 24% planned for Japan and 10% for Britain. Canada and Mexico are not currently subject to reciprocal tariffs because Trump’s prior 25% fentanyl and immigration-related tariffs will stay in place. The moves appear to have been decided using relatively crude calculations of goods trade deficits with the United States, something that rankled many investors given the amount of time taken to construct the plan.

Countries affected around the world said they would now examine retaliatory measures, with the EU proposing its own tariffs. There are also reports suggesting the bloc is considering additional fiscal supports for the worst-affected sectors. Overall, Deutsche Bank estimates the average tariff rate on U.S. imports could now rise to 25-30% – the highest in more than 100 years and above most expectations.

Stock and bond markets reflected investor concerns about the tariffs’ potentially damaging impact on U.S. and world growth. S&P futures were down 3.1% ahead of Thursday’s open, with futures on the Russell 2000 down over 4%, worse than the 2.7% hit in Tokyo and the losses of more than 1% in Europe and Hong Kong. The VIX ‘fear index’ of Wall Street stock volatility climbed three points to 26, back to levels seen a month ago when U.S. stocks were falling sharply. Treasury yields plummeted, with the 10-year down about 15 basis points to 6-month lows, testing 4% at one point.

But currency moves were less intuitive, with the dollar tracking Treasury yields to slide to its lowest since October. It eyed its biggest one-day hit since 2023. This was somewhat surprising given that tariffs were expected by many to be more damaging to overseas economies, which would typically lift the dollar. Several reasons have been suggested for this move. One is that the American economy may feel a bigger initial hit than the rest of the world due to the scale of the new average U.S. trade barriers, especially if fiscal measures abroad kick in alongside retaliatory tariffs. That’s lifted the euro. Another is a dash for the yen’s ‘safe haven’ status. And Canada’s dollar and Mexico’s peso also rose on the assumption that they have escaped the worst-case scenario for now. China’s yuan was weaker, but that was limited by state bank buying and officials setting the onshore reference rate higher. The dollar’s losses may also simply be due to the fact that foreign investors in U.S. assets are resuming their exit from America’s markets, which we saw in the first quarter.

In other news, Tesla’s stock overnight lost most of Wednesday’s 5% gains that were based on reports that its boss Elon Musk would soon step back from his government advisory role, reports Musk and the White House dismissed.

The real tariff uncertainty starts now

Whatever you make of the sweeping tariff plan U.S. President Donald Trump dropped on Wednesday, remember that the real uncertainty about the potential economic damage only starts now. Relief at getting some clarity on Wednesday was understandable. But we still have no hard evidence of just how these measures will directly affect corporate and household decision