Stock markets in the UK and Europe have suffered heavy falls after Donald Trump announced a number of tariffs, prompting fears of a global trade war.
The US president rattled investors by signing off on tariffs on China, Canada and Mexico over the weekend, triggering what was quickly described as a “Trump tariff tantrum”.
Stocks fell in Asia on Monday morning, followed by markets in Europe. The FTSE 100 share index shed 106 points to hit 8,570 points, falling back from last Friday’s record high.
Germany’s DAX index fell by nearly 2%, while France’s CAC 40 was down by 1.7%. Spain’s IBEX dropped 1% and Italy’s FTSE MIB lost 1.2%.
Shares in some of the biggest European carmakers slumped. Volkswagen, BMW, Porsche, Volvo Cars, Stellantis and the commercial vehicle maker Daimler Truck all fell between about 5% and 6%. The French car parts supplier Valeo slumped by 8%.
Trump announced 25% tariffs on Mexico and Canada, and additional 10% tariffs on Chinese goods.
In London, nearly every share fell, led by asset managers Polar Capital, down by 4.5%, while Intermediate Capital Group, the mining company Antofagasta and Scottish Mortgage Investment Trust all fell by more than 3%.
UK bank shares also fell. Barclays, which was hit by an IT glitch that left thousands of customers locked out of their accounts on Friday and Saturday, was down by 2.5%.
Lloyds Banking Group fell by 1.8% – and also suffered outages with its Lloyds Bank and Halifax banking apps on Monday morning – while NatWest fell by 1.9% and HSBC was down 1.4%.
The pound edged lower against a strengthened US dollar, down 0.6% at $1.23, but rose 0.5% to €1.20 as the euro came under pressure.
Asian markets were the first to open since the weekend’s tariff announcements, with Japan’s Nikkei slumping 2.8% and the Hang Seng in Hong Kong 1% lower, although mainland Chinese markets remain shut for the lunar new year holiday until Wednesday.
The sell-off also engulfed cryptocurrencies, which have rallied since Trump’s election in November. Bitcoin, the world’s biggest cryptocurrency, hit a three-week low of $91,441.89 overnight and stood at $95,730.35, down 6.2%. The smaller Ethereum cryptocurrency has lost nearly 25% in value since Friday, marking its biggest three-day loss since November 2022. It last fetched $2,592.14.
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Richard Hunter, the head of markets at the online investment platform Interactive Investor, said: “February seems likely to begin with a Trump tariff tantrum, with very early futures prices signalling declines of more than 600 points for the Dow Jones, and declines of 2% or more for the benchmark S&P 500 and Nasdaq indices.”
Naeem Aslam, the chief investment officer at Zaye Capital Markets, said investors were bracing for heightened uncertainty in global trade and economic stability: “These downturns are driven by investor anxiety about the broader impact of tariffs on the global economy, particularly as European economies are highly intertwined with US trade policies.”
Kathleen Brooks, the research director at XTB, said: “This does not mean that the UK economy will avoid impact from the tariffs, but it does mean that the UK economy could be more resilient than elsewhere.”
She added: “It’s too early to know exactly what impact tariffs will have on the global economy, but it is fair to say that they have a high potential of triggering inflation, and weighing heavily on global growth, including the US economy.”
Russ Mould, the investment director at AJ Bell, said: “The prospect of a full-blown trade war has spooked investors as they weigh up the prospect of widespread retaliation by countries on the receiving end of Donald Trump’s tariff frenzy.
“Affected countries aren’t going to take the hit lying down and a tit-for-tat scenario is now looking real. That could result in higher inflation and put a stop to further interest rate cuts for the time being – exactly the opposite of what equity investors want to happen.”
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