The British pound has reacted strongly to Donald Trump’s sweeping tariffs, which were unveiled on Wednesday. Sterling was up by 0.7% this morning (April 3) to $1.3097 after the US President announced the UK would be charged 10% on US imports of British goods and 25% on foreign cars.
The pound has been trading above $1.30 for the first time since October. Before Mr Trump’s bombshell announcement it was at $1.298. Sterling was trading about level with the euro at €1.1964. The euro rose against the dollar almost one percent today to a two-week high of $1.0950.
Meanwhile, London’s FTSE 100 Index dropped sharply on opening, falling 122.4 points or 1.4% to 8486.09 in the first few minutes of trading. Asian markets and US futures have also tumbled. The future for the S&P 500 dropped 2.9% while that for the Dow Jones Industrial Average lost 2.2%, suggesting potential losses when US markets reopen today.
In Asian trading, Tokyo’s Nikkei 225 index dipped 4% briefly, with car makers and banks taking big hits. Just before the market closed it was down 3.4% at 34,498.31.
Matt Britzman, Senior Equity Analyst at Hargreaves Lansdown, said: “Trump’s bold attempt to reshape international trade has sent shockwaves through global markets.
“The effects of ‘Liberation Day’ are being felt far and wide, with Asian markets down overnight, European stocks under pressure in early trading, and US futures pointing to a big drop later today.”
He added while the UK may seem to have fared better than some countries, its deep ties to the global economy make a slowdown in growth “almost unavoidable”, with the FTSE 100 caught up in the global market sell-off.
Gold prices have continued to rally as investors flock to safer assets. These reached a fresh all-time high in the aftermath of Mr Trump’s announcement, before pulling back a touch on Thursday morning.
Mr Britzman also explained that oil prices have sunk as markets adjust to the impact of the sweeping tariffs, which are expected to weigh heavily on global growth.
Mr Trump waited to make his announcement after the US market closed on Wednesday. He declared a 10% baseline tax on imports from all countries and higher tariff rates on dozens of others running trade surpluses with the United States.
The president held up a chart while speaking at the White House, showing the US would charge a 34% tax on imports from China, a 20% tax on imports from the European Union and 32% on Taiwan.
