The US stock market was in freefall today as investors feared Donald Trump’s tariffs would devastate the American economy. A meltdown in the price of US shares means the value of pension funds across the world including the UK falls too, as most “defined contribution” pension funds are invested at least partly in the US.
The NASDAQ market, which has a particular focus on technology stocks, has fallen in value by more than 10% in one month, as trading continued today. Big losers include Tesla, the electric car firm led by Donald Trump’s ally Elon Musk, is down 31% in one month. The better-known Dow Jones, an index of 30 top companies, was down more than 4% in one month.
Mr Trump dismissed business concerns over the uncertainty caused by his planned tariffs on a range of American trading partners, as well as the prospect of higher prices, but was unable to rule out the possibility of a recession in America this year.
After imposing and then quickly pausing 25% tariffs on imports from Mexico and Canada that sent markets tumbling over concerns of a trade war, Mr Trump said his plans for broader “reciprocal” tariffs will go into effect on April 2, raising them to match what other countries assess.
Asked about warnings of an economic contraction in the first quarter of the year, Mr Trump seemingly acknowledged that his plans could affect US growth.
However, he claimed, it would ultimately be “great for us”.
Although Mr Trump’s early implementation of tariffs has been inconsistent – with him imposing them, then pulling many back – he has been steadfast in endorsing the idea of 21st century protectionism.
There have even been suggestions that higher import tariffs on America’s foreign trading partners could eventually replace the federal income tax.
Meanwhile, the leaders of China – which has been locked in a trade and tech war with the US for years – say they are open to talks with the US President, but they also made preparations for higher US tariffs, which have risen 20% since Mr Trump took office seven weeks ago.
Intent on not being caught as off-guard as they were during Mr Trump’s first term, Chinese leaders were ready with retaliatory measures – imposing their own taxes this past week on key US farm imports and more.
After the US this past week imposed another 10% tariff, on top of the 10% imposed on February 4, the Chinese foreign ministry uttered its sharpest retort yet: “If war is what the US wants, be it a tariff war, a trade war or any other type of war, we’re ready to fight till the end.”
The UK has hoped to avoid being targeted by US tariffs. However, chaos in the US economy will inevitably affect us too.
