President Donald Trump, on April 2, 2025, announced broad tariffs on all imports, causing global stock markets to plummet as a consequence. The policies, introduced under what he described as “Liberation Day” tariffs, range from 10% to 50% on imported goods. The move was presented as a response to decades of trade deficits.
China promptly reacted by increasing tariffs by 34% on US imports. This has scared investors and economists about whether global trade relations are going to be further disrupted. Asian, European, and US stock markets fell sharply immediately after the announcement.
In Asia, Japan’s Nikkei 225 index fell by 7.8%, while Hong Kong, China, and Taiwanese markets fell between 7% and 13%. European markets also fell as Germany’s DAX and France’s CAC 40 each fell by 5.8%, while the UK’s FTSE 100 fell by 4.9%. Futures in the United States signaled further falls that had the S&P 500 hovering close to bear market levels.
In spite of the volatility of the market, Trump argued in favor of the tariff move, saying that the tariffs would generate giant revenues and assist in balancing trade. He also rejected the fear of inflation, citing that prices for commodity areas like oil, interest rates, and food decreased.
Financial analysts were concerned about potential economic impacts. Recession chances now stand at 60% for some economists who presently raise doubts about the integrity of private credit markets under these shocks.
Foreign investors are now keenly monitoring any subsequent happenings, particularly regarding diplomatic negotiations that would soften tensions. The U.S. Federal Reserve has so far withheld from meaningful interest rate adjustments, opting instead to test the market reaction before further intervention.
The statement is a turning point of international trade negotiations, with investors left speculating on new tactics by foreign economies. While the tariffs are meant to protect the national interests of countries, they pose new risks to financial markets and escalate the levels of risk for international trade relationships.