Stocks tumble on Wall Street as Donald Trump’s sweeping tariffs send shockwaves through global markets – business live

There is no chance Donald Trump will back off his tariffs, Commerce Secretary Howard Lutnick has declared. In a blow to hopes that Trump could be intimidated into reversing course, Lutnick told CNN: “The president is not going to back off what he announced yesterday. He is not going to back off.” Consultancy Oxford Economics is cutting its UK growth forecast after President Trump imposed larger-than-expected tariffs on US imports. The firm’s new baselines will likely be just below its current forecast of 1% for 2025 and close to 1% for 2026, from the previous 1.5%. That is a blow to chancellor Rachel Reeves, as it could mean the UK misses her borrowing targets, explains UK economist Andrew Goodwin: “As things stand, it looks likely that the OBR will judge the government will miss its fiscal rules when it next updates its forecasts in the autumn.” A new survey has found that two thirds of Britons think the US tariffs announced yesterday will have a negative effect on the UK economy. YouGov says it polled 7483 adults about Donald Trump’s announcement last night, and found that just 4% said they would have either a “very positive” or “fairly positive” effect, while 67% said they would have a “fairly negative” or “very negative” effect, 14% thought the effect would be “neither positive nor negative” and 15% said “don’t know”. Reform voters were more likely to say the tariffs would have no effect than other voting groups, YouGov added. An “unprecedent shock” is about to hit the global economy, Dutch bank ABN Amro has told clients. ABN Amro predicts that both the US and the eurozone to slow sharply and only just skirt a recession, while the US will also have to deal with higher inflation. It says: The White House’s reciprocal tariff plan had been billed as a game changer, and the ‘Liberation Day’ announcement yesterday certainly lived up to that. In our new base case, the eurozone will see an earlier and bigger downward growth shock, and alongside the US is likely to skirt recession for the remainder of 2025. A recession is not our base case but the risk has risen significantly. For next year, we expect much higher fiscal spending in Europe (both defence generally and in Germany infrastructure) to lead to a rebound in growth. The S&P 500 share index is down 3.9% and on track for its worst day since September 2022, Marketwatch reports. Yesterday’s speech by Donald Trump, announcing new tariffs on America’s trading partners, was “another blow to global trade rules,” warns trade expert Simon Evenett. Evenett, who co-chairs the World Economic Forum’s Council on Trade & Investment, says: “The size of the import tariff increases are so large for many countries that they being offset by currency depreciation is very unlikely.” “South East Asian nations have been hit particularly hard… Moving factories to that region from China now seriously discouraged.” “Tariff uncertainty will continue. The fate of the open world trading system now lies in the hands of officials in America’s major trading powers.” “EU, Japan, and India are very likely to retaliate. Escalation spiral of tariffs cannot be ruled out.” “Within Europe, U.K. hit much by lower tariff increases (10% versus EU’s 20%). In terms of headline tariff hikes, the UK is Europe’s winner.” “The U.S. administration’s theory of harm is now generalised. The way the White House framed these matters foreign state practices aren’t a problem per se, it is their impact on national consumption, imports, and the trade deficit that matters.” Nearly $300bn has been wiped off Apple’s value today, amid the stock market turmoil. Apple’s shares are currently down 9%, which by my maths cuts its market capitalisation to around $3.07 trillion, down from $3.367tn last night. Apple will be hurt by the new US tariffs on imports from China, Taiwan, India and Vietnam, as much of its manufacturing and supply chain is based in the Asia-Pacific region. Ben Barringer, global technology analyst at Quilter Cheviot, told clients: “Apple makes 90% of its products in China, with 10% in other Asian countries such as Vietnam and India. These countries are facing the harshest tariffs, so we can expect iPhones and Apple Watches to go up in price, while hitting the profits of the company significantly. Switching production to the US is neither easy, nor cheap. The tariffs are also likely to create demand destruction, which means cutbacks on software and cloud spending. Alphabet, will see a double whammy with digital advertising also cut back on in a tougher economic environment – with Meta also being hit in this regard. Concerns have been growing today that Donald Trump’s tough new tariffs could push the US economy into a recession. Seema Shah, chief global strategist at Principal Asset Management, has warned that initial estimates suggest that US GDP growth is likely to see an initial hit of around 2.5%, with the fallout potentially larger if some trade partners retaliate. Shah adds that early calculations suggest that a U.S. recession could materialize unless: At least some tariff rates are reduced in the coming months; and, The Fed resumes policy rate cuts; and, Growth-friendly measures are introduced later this year, such as tax cuts and deregulation. UK food producers are hoping that London will not cave into pressure from Washington to relax food standards to reach a trade deal. Country Land and Business Association (CLA) vice president Joe Evans says: “Donald Trump might demand we eat chlorinated chicken and beef reared using growth hormones – but British consumers say no. British farmers, who must comply with some of the highest animal welfare and environmental regulations in the world, should not be forced to compete with American farmers who produce cheap food to much lower standards. “British exports will be affected by these tariffs, which could harm producers of world class wine, spirits, cheeses and other goods. The best thing the public can do to support these farmers and producers is to buy British. “Ministers would do well to remember that it is the job of British farmers to feed the nation, whilst at the same time being exemplars of sustainable farming practices. We can only do that with a strong and healthy farming sector. Unfortunately, recent government policies – such as changes to inheritance tax – have left the industry considerably weaker. The Prime Minister and the Chancellor should reverse these disastrous policies immediately, adding a new line of defence against America’s aggressive trade demands.” Anyone who may have doubted Trump’s seriousness about rebalancing the economy through tariffs and his deeply held belief that tariffs work, should be convinced by now, points out Libby Cantrill, head of us public policy at bond-trading giant PIMCO. Cantrill tells clients: While we would expect Trump to soften at least some of these tariffs at some point, what the limit – political or otherwise – for him to pivot to do that remains to be seen. Assuming the tariffs stay on – even for a few quarters – we should expect to see economic damage both in terms of a drag on growth, maybe even tipping into recession, and upward pressure on inflation. At the same time, we may see Trump lean into the tax cuts – the proverbial dessert – which could be accelerated and be bigger than originally thought as an effort to give the market what would be very welcome dessert after a strict diet of veggies so far. Wall Street’s ‘fear index’ is romping higher, as anxiety grips the New York stock markets. The Cboe Volatility Index is up 27% today, near to the recent highs set last month: The Wall Street sell-off is gathering pace! The S&P 500 index is now down almost 4%, while the Nasdaq has lost almost 5%. The Russell 2000 index, which tracks the share price of small US companies, has slumped by 5.5%. Trump’s tarrifs could spark global economic warfare, fears Dr Eric Golson, Associate Professor of Economics at the University of Surrey. “Lower tariffs were the result of a series of compromises on trade, intellectual property and services in the 1990s. Undoing the trade compromises risk spilling over from trade to full-scale economic warfare. A 24% average weighted tariff is about ten times current US levels. The EU, Chinese and others will definitely consider going after America’s weaknesses including patents and services. American businesses could find themselves fighting a multi-front economic war with their own government on tariffs and everyone one else trying to protect their patents and services. “Another question that large economic powers could pose in response to these unilateral tariff actions could be around global capital mobility - going right to the core of globalisation.” It’s unusual to see a trader actually running on the Wall Street trading floor, but this was the scene at the opening bell in New York today: Other traders were heads-down juggling their buy and sell orders: Bloomberg have calculated that roughly $1.7 trillion was erased from the S&P 500 Index at the start of trading today. That highlights just how much shareholder value is being wiped out by the fears that Donald Trump’s new tariffs could push the US into a recession. The top fallers on the Dow Jones industrial average are Nike (-11%), Apple (-9%), American Express (-8%), Amazon (-7.5%), and Goldman Sachs (-7.4%). They’re followed by a flurry of other big-name firms: Boeing (-6.8%), Nvidia (-5.4%) JPMorgan (-5%), Caterpillar (-4.9%) Home Depot (-4.8%), Walt Disney (-4.6%) and Salesforce (-4.2%). There’s no respite for the US dollar yet either. The US currency has now slumped by 2.2% so far today against a basket of other major currencies, to a six-month low. It’s sharply down against the euro, which has jumped by nearly two and a half cents to trade at $1.109, its highest since the start of October last year. As we reported earlier, Deutsche Bank has warned there is a risk of a ‘confidence crisis’ in the US dollar. Francesco Pesole, a currency strategist at ING, has said (via the Financial Times): “The collapse is a loss of confidence in dollar-denominated assets in general. “It’s a vote of no confidence on 100 days of Trump.” Newsflash: Stocks are tumbling on Wall Street at the start of trading, as New York traders give their verdict on the new trade war unleashed by the White House last night. As the opening bell rang out across the New York stock exchange, the Dow Jones industrial average, which tracks 30 of the largest US companies, promptly plunged by 1,137 points, or 2.7%, to 41,087 points. Nike is the biggest faller, sliding by over 10%, while Amazon and Goldman Sachs have both dropped by around 6%. The broader S&P 500 share index is sliding down too – it’s down 3.3% in early trading. The tech-focused Nasdaq is being hammered, down 4.5%. This follows heavy losses in Asia-Pacific markets earlier today, where Vietnam’s main share index slumped by 6.8% after Vietnamese goods were hit with a new 46% tariff. European markets are deep in the red too, with the UK’s FTSE 100 index is now down 1.6% or 138 points, at 8469 points. Markets have been shaken by Donald Trump’s new tariffs, which are widely expected to hurt the outlook for global growth and inflation. Chris Iggo, chief investment officer for Core Investments at AXA, explains: The sweeping tariff package came in at the high end of expectations and, according to analysts, will increase the effective tariff on imports to the US to between 20% and 25%. Some analysts suggest that US economic growth could be reduced by 1% to 2% while inflation will move higher. This will be seen as a stagflation for the US economy. Tariffs on goods from the rest of the world should reduce export growth and will be a negative growth shock, with Asia and Europe most affected given the size of the proposed tariff rates. Futures tracking the Nasdaq share index have now tumbled by 4%, as fears of a full-blown trade war grip Wall Street. Apple has sunk 7.6% in premarket trading, reeling from the impact of an aggregate 54% tariff on China where much of its manufacturing takes place. Microsoft are down 2.7% in the futures market, while chip giant Nvidia is heading for a 6% tumble. Elias Haddad, senior markets strategist at Brown Brothers Harriman, says: “This was the first bullet thrown in this trade war and it could get nasty and that is spooking investors. We’re going to continue to trade on a heavy tone because of the heightened risk of either recession or stagflation. “We could see the correction bottom out when we have firm evidence that we’re not falling into recession.” Tensions is mounting on Wall Street as investors brace for stock trading to begin. Yesterday’s announcement of new global tariffs by Donald Trump was made just after the US stock market closed on Wednesday, so traders will be itching to respond. The futures market suggests US stocks will suffer heavy losses; the S&P 500 share index is currently down by a hefty 3.7% in pre-market trading. Confidence in the US stock market has been dented in recent weeks by fears of a global trade war. Today, Capital Economics have slashed their forecast for the S&P 500’s end-of-year close, to 5,500 points, down from 7,000 points previously. Their chief markets economist, John Higgins, says: This is roughly 10% below its closing peak on 19th February and not far from where it may open today after some initial fall-out from the tariff news. Higgins adds that there are two reasons for this “significant” downgrade: The first is yesterday’s announcement of greater tariffs on US imports than we had assumed. In such circumstances, we no longer think the economic backdrop will be sufficiently conducive to a rally in equities. The second is a recent shift in the AI narrative, which has shaken our conviction that big-tech will drive up the index. US commerce secretary Howard Lutnick has said that the Trump administration is talking to all major trading partners throughout the world about ways to bring down the new tariffs announced last night. Speaking to CNBC, Lutnick explained that other countries will have to change their rules to allow more imports of US products. He says: “The key is, will they take our agricultural products? Will they treat us fairly? Can they treat us fairly? And the answer is, over time, that is going to be yes. “American products are going to be better sold elsewhere in the world.” Newsflash: Ratings agency Fitch has cut its credit rating on China. Fitch has downgraded China’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘A’ from ‘A+’, with a stable outlook. Fitch says it acted due to China’s rising debts, and deteriorating public finances: The downgrade reflects our expectations of a continued weakening of China’s public finances and a rapidly rising public debt trajectory during the country’s economic transition. In our view, sustained fiscal stimulus will be deployed to support growth, amid subdued domestic demand, rising tariffs and deflationary pressures. This support, along with a structural erosion in the revenue base, will likely keep fiscal deficits high. We expect the government debt/GDP to continue its sharp upward trend over the next few years, driven by these high deficits, ongoing crystallisation of contingent liabilities and subdued nominal GDP growth. This does not appear to be a direct response to Donald Trump’s decision to impose a new 34% tariff rate on China. Fitch says it has not yet calculated the impact, explaining: While the 2 April reciprocal tariff announcements are not yet incorporated into our forecasts and there is uncertainty about their impact, there is headroom at the current rating to accommodate the likely implications for economic growth and fiscal metrics. Analysts at Oxford Economics have calculated that a global recession is likely to be avoided, despite the huge impact of yesterday’s ‘Liberation Day’ tariff hikes In a report issued today, their Director of Global Macro Research, Ben May, predicts that annual global GDP growth could plausibly fall below 2%. He writes: “This would still be some way off the technical definition of a global recession – for this to happen, GDP growth would need to fall below the rate of world population growth, which is currently about 0.9% in annual terms. Nonetheless, it would be the weakest annual growth rate since the global financial crisis, excluding the pandemic period.” The oil price is cratering, on growing fears that Donald Trump’s trade war could trigger a recession. Brent crude has now plunged by 5.8% so far today to $70.61 per barrel. US crude is being hit even harder, down 6% at $67.34 per barrel. David Morrison, senior market analyst at Trade Nation, says oil has fallen as the scale and scope of Trump’s tariffs, and their impact on the global economy, became apparent. Energy imports are largely unaffected tariff-wise. But investors were reacting to the estimated damage these tariffs could do to global trade, and therefore global economic growth. The size of the tariffs are such that business activity could slow sharply, leading to significantly lower demand for oil. Paul Diggle, chief economist at Aberdeen, suggests the White House may not be displeased by the market reaction. Diggle says: So far, the administration appears far more tolerant of market weakness than in Trump’s first term. Indeed, low bond yields and a weaker dollar may be actively helpful market moves give the administration’s preferences. Diggle also warns that yesterday’s “dramatic” announcements may not represent “peak tariffs”. He adds: We still think additional sector specific tariffs are coming, including on semiconductors, copper, lumber and pharmaceuticals. Indeed, these products were mentioned in the executive order, specifying that the reciprocal tariff policy does not apply to them, therefore leaving open that specific rates will be coming soon. On the other hand, that does seem to mean that sector-specific tariffs and reciprocal tariffs aren’t additive. Additionally, the Executive Order provides the President with the right to modify tariff rates in the event of retaliatory measures, meaning rates on some trade partners could be pushed higher still. There is still scope for US tariffs to eventually settle at a lower level, and this is probably still a widespread expectation. The 10% global baseline is likely a floor, but structuring the reciprocal tariff as an additional rate on top of that at least leaves some chance of it then coming down. Households across America who own stocks will be watching Wall Street through their fingers today…. Newsflash: U.S.-based employers announced 275,240 job cuts in March, driven by Elon Musk’s slashing of the Federal government. Consultancy firm Challenger, Gray & Christmas have reported that job cut announcements rose 60% month-on-month, and were 205% higher than in March 2024. That’s a record high for any March, and the third-highest monthly total ever recorded. Of that total, 216,670 were due to “DOGE Actions” – Musk’s campaign to improve government efficiency by making drastic cuts to government bureaucracy. Andrew Challenger, senior vice president and workplace expert for Challenger, Gray & Christmas, explains: “Job cut announcements were dominated last month by Department of Government Efficiency [DOGE] plans to eliminate positions in the federal government. It would have otherwise been a fairly quiet month for layoffs.” Here’s a chart showing how Donald Trump’s new tariffs have weakened the US dollar: Over in Madrid, Spain’s prime minister, Pedro Sánchez, has lambasted Donald Trump’s “protectionist” tariffs against EU products, saying they run “contrary to the interests of millions of citizens on this side of the Atlantic and in the US, who will unfortunately see their businesses and their purchase power” affected by the measures. In an strongly worded and defiant speech this morning, the socialist leader said the “wrongs of one leader” should not be allowed to impede majority progress, adding that Spain and the EU would use Trump’s “trade war” to become stronger. Jakub Krupa’s Europe Live blog has full details: Over in parliament, business secretary Jonathan Reynolds has told MPs that the UK will consult British businesses on how the Government could impose retaliatory trade tariffs on the US. In a statement to the House of Commons, Reynolds says he is opening a consultation on possible retaliatory tariffs. Reynolds explains: It remains our belief that the best route to economic stability for working people is a negotiated deal with the US that builds on our shared strengths. However, we do reserve the right to take any action we deem necessary if a deal is not secured. To enable the UK to have every option open to us in future, I am today launching a request for input on the implications for British businesses of possible retaliatory action. This is a formal step necessary for us to keep all options on the table. We will seek the views of UK stakeholders over four weeks until 1 May 2025 on products that could potentially be included in any UK tariff response. This exercise will also give businesses the chance to have their say and influence the design of any possible UK action. My colleague Andy Sparrow’s Politics Live blog has more details: Britain’s energy sector is digesting the impact of Donald Trump’s new tariffs. A senior energy industry executive told the Guardian: “No one is quite sure what this will mean for the global supply chains. There is an environment of uncertainty about investment. There are a lot of people being cautious - they’re not making a decision either way about anything. They’re saying, ‘let’s stop, take a breath, and see what happens’. If you want economic growth that’s not a good thing, and the Chancellor and the Prime minister will no doubt be worrying about that. But there’s a lot that is within the control of the government which can encourage investments if they get the right frameworks and regulation in place. The only country that can screw that up for the UK, is the UK.” And seperately, RenewableUK’s deputy chief executive Jane Cooper has warned that Trump’s tariffs risk pushing up prices for consumers and harming industry. Cooper says: “Tariffs and trade disputes risk pushing up prices for consumers and harming industry, so the priority must be resolving this dispute and developing a UK trade strategy that strengthens our energy security and reduces risks to the UK supply chain. These tariffs, combined with the US Government’s recent moves to halt the development of offshore wind, will mean American and UK companies will miss out on opportunities to trade, invest and collaborate in innovative clean technology. “While trade in goods for renewables between the US and UK is relatively limited, we are concerned at the wider impact these tariffs could have on the supply chain in the UK and across Europe. Many of our manufacturers operating in the UK - and collectively employing thousands of people here - also have factories in the EU, so President Trump’s announcements will have a far-reaching impact across our sector”. After a volatile morning on Europe’s financial markets, here’s a quick recap of the situation. The US dollar has tumbled today as investors fear that Donald Trump’s new trade war could trigger a recession. The dollar is down around 2% against a basket of other currencies, a sizeable selloff, after investors were startled by the scale of the tariffs announced by the US president last night. The dollar is now down at a six-month low, with Deutsche Bank warning its clients to “beware a dollar confidence crisis”. Deutsche says: The safe haven properties of the dollar are being eroded and this is imposing a significant cost on unhedged dollar holdings. Beyond that, developments since the start of the year make us worried about a broader undermining of confidence in the US economic outlook and the medium-term desirability of dollar allocations. European stock markets have had a rough morning. Banks and miners have fallen on fears of an economic downturn. Luxury goods stocks are also lower, an anticipation that their exports to the US will be hurt by new tariffs. Here’s the situation: FTSE 100: down 130 points or -1.5% at 8477 points Germany’s DAX: down 496 points or 2.2% at 21,894 points France’s CAC: down 195 points or 2.5% at 7,662 points. That followed a sharp plunge in shares across the Asia-Pacific, where Japan’s Nikkei lost 2.7%. The sell-off came after China was hit with a 34% fee, in addition to a 20% tariff on all Chinese imports already in place, while the EU will now be levied at 20% and Japan at 24%. Trump said America had been “looted, pillaged and raped” by its trading partners: “In many cases, the friend is worse than the foe.” Wall Street is heading for heavy losses when trading begins in New York at 9.30am local time (2.30pm BST). Economists are warning that Trump’s tariffs will push the US’s effective tariff rate to its highest level in over a century. Raphael Olsyzna-Marzys, international economist at J. Safra Sarasin Sustainable Asset Management, says: The US effective tariff rate is set to rise to around 25%, the highest level since the start of the 20th century. This will have a large and direct negative impact on the US economy, pushing growth lower and prices higher. Global growth will also be weaker. What happens next will depend on how countries respond, but we expect some escalation before any eventual de-escalation. Outside the US, the most significant impact will be on Germany and Asian economies. A deteriorating growth outlook is likely to push central banks to lower policy rates, but they will need to ensure that longer-term inflation expectations stay anchored. Still, we think that bond yields will fall further and continue to favour intermediate maturities. Current US equity valuations are not priced for a significant slowdown. We still prefer UK equities, defensives over cyclicals and value overgrowth. Finally, the US dollar is likely to suffer from relative growth headwinds. Safe-haven currencies should do well in the near term. In other developments: Economists have questioned the maths used by the White House to calculate its new tariffs. The City has raised its expectations for cuts to eurozone interest rates Sir Keir Starmer has pledged to react in the UK’s national interests. US tariffs are a “major blow” to the world economy and the EU is preparing counter measures that will apply if negotiations fail, EU Commission chief Ursula von der Leyen has said. “The global economy will massively suffer, uncertainty will spiral and trigger the rise of further protectionism,” she said. China’s commerce ministry called for Washington to “immediately cancel” the new tariffs, warning they “endanger global economic development” and would hurt US interests and international supply chains. It called for dialogue and added: “There is no winner in a trade war, and there is no way out for protectionism.” The new US tariffs could derail the eurozone’s economic recovery and push the region into recession. Gaurav Ganguly, senior director for economic research at Moody’s Analytics, warns: “The euro zone economy has recently been displaying signs of recovery, but reciprocal tariffs of 20% on exports to the US will severely damage growth prospects this year and next. The direct impact of lower exports will drag growth down but even more damaging could be the broader shock to confidence and the tightening of financial conditions that result. If negotiations fail to yield concessions and these tariffs remain in place, the eurozone will slip into recession this year.” Britain’s farmers have warned that tariffs will “increase the challenge for the UK and agriculture” at a time when the US is the largest market outside of the EU for UK agri-food products. British-made meats, cheese and traditional tastes like tea and biscuits have proved popular with American consumers in recent times. Among agri-food products, Scotch whisky, beer and salmon are commonly transported across the Atlantic. The National Farmers’ Union (NFU said it also had concerns that food from other nations originally destined for the US may be diverted instead to Britain, “negatively impacting” the UK market. NFU president Tom Bradshaw said: “The United States is the largest market for British agri-food products outside of the European Union and our farmers are proud to supply high quality, authentic, and unique British meats and cheeses to American consumers. We stand united in our desire to work together to ensure British farmers and growers are at the forefront of any decision-making and will continue to work hand in glove with government as the situation develops.” Donald Trump’s new trade war is going down like a cup of cold sick on Wall Street. The futures market is indicating that the Dow Jones industrial average (which tracks 30 large US companies) is on track to fall 2.7% when trading begins in around three hours time. The broader S&P 500 index is set for a bumpier fall – its down 3.4% in the futures market. The tech-focused Nasdaq index is down 3.8% pre-market. Traders will be calculating that the imposition of new tariffs on imports into the US will hurt its economy, especially if other countries take retaliatory action by imposing tariffs on US exports. Analysts at wealth manager Julius Baer say: The U.S. tariffs put the rest of the world into a poor position for retaliation and negotiation, likely leading to a period of uncertainty and potential risks to global growth and U.S. inflation over the next 3-9 months. The more retaliations, the worse, and the more self help at home, the better. Julius Baer remains cautious on U.S. equities and sees better opportunities in Europe and China. The tariffs are likely the start of negotiations that could lead to lower trade barriers than those announced on Wednesday, potentially dragging on for 3-9 months and driving uncertainty during that period. The pound has now gained almost two cents against the ailing US dollar, and is approaching $1.32 for the first time since last October. Oooh. Deutsche Bank are now warning clients to “beware a dollar confidence crisis”. George Saravelos, Deutsche’s head of FX Research, fears that confidence in the US dollar, and America’s economy, is being undermined This is a timely warning, as the US dollar has sunk by 1.7% so far today as it weakens sharply against other currencies. Saravelos writes: The safe haven properties of the dollar are being eroded and this is imposing a significant cost on unhedged dollar holdings. Beyond that, developments since the start of the year make us worried about a broader undermining of confidence in the US economic outlook and the medium-term desirability of dollar allocations. Saravelos says this risks “a self-fulfilling unwind” of extreme US asset overweight positions from countries that have exported capital to the US over the last decade. Most of the developed world belongs to this category. At the end of the day, the US has a large current account deficit, and the currency is reliant on capital inflows for stability. A drop in the dollar, a drop in US equities and a rise in term premium in US treasuries would be the strongest market signal that a process of US disinvestment is accelerating. A rise in term premia on US treasuries has not materialized yet, but it would be a very negative signal if it did. Our overall message is that there is a risk that major shifts in capital flow allocations take over from currency fundamentals and that FX moves become disorderly. We would caution that if the dollar decline accelerates, it would be a highly unwelcome development for global central banks. The last thing the ECB wants is an externally imposed disinflationary shock from a loss in dollar confidence and a sharp appreciation in the euro on top of tariffs. Expect pushback. We are in the midst of dramatic regime change in markets. Markets have been caught off guard by the severity of Trump’s tariffs, reports. Jacob Falkencrone, global head of investment strategy at investment platform Saxo. He flags there are growing fears that the trade war could lead to stagflation (rising prices but no growth) or a recession. “While Trump claims the move will invigorate US manufacturing, many economists warn of potential negative impacts on the economy. The tariff offensive marks a significant economic turning point. With the US now enforcing what amounts to the steepest trade barriers in a century, the risks are more than just theoretical—they are visible in real time, and they are mounting.” “The immediate concern is the US economy, where the average effective tariff rate is jumping nearly 19 percentage points. That’s a direct tax on consumption and corporate costs, especially for industries relying on imported materials. The result? Higher prices, tighter margins, weaker growth—and a heightened risk of recession. Economists warn that these tariffs could accelerate the arrival of stagflation, where inflation rises even as the economy stagnates or contracts.” “Globally, the picture is just as concerning. China could lose up to 2.4 percentage points of GDP growth, according to recent forecasts, and the ripple effects could hit Europe, Asia, and emerging markets hard. This isn’t just a US-centric problem—it’s a potential global slowdown in the making.” The US dollar is being hurt by fears that Donald Trump’s trade war could drive America’s economy into a recession, says Raffi Boyadjian, lead market analyst at XM: Worries about the economic consequences of Trump’s decisions were also reflected in the US dollar, as the currency slid on recession fears. Investors upped their bets of Fed rate cuts to 80 basis points, fully pricing in three 25-bps reductions for the year. The sell-off in the US dollar is accelerating, dragging the greenback down to a new six-month low. The dollar is sliding against rival currrencies, pulling the dollar index down to its lowest level since October. The US dollar has turned out to be one of the biggest losers of ‘Liberation Day’, says Daniela Sabin Hathorn, senior market analyst at Capital.com. The bottom line is that uncertainty remains high — even without considering that some of these new tariffs might be cancelled or revised after a few days of negotiations. Rough estimates suggest the economic impact could be even greater than the Smoot-Hawley tariffs of the 1930s - a set of protectionist trade policies that raised import taxes and are widely believed to have worsened the Great Depression by triggering global retaliation and slowing international trade [see earlier post for more details]. This isn’t just about trying to balance trade — it’s more like the U.S. is trying to become completely self-reliant. The U.S. is attempting to produce and consume everything internally instead of relying on global trade. At this level of tariffs, the U.S. would basically isolate itself economically, cutting off most of the relations with other countries. It’s hard to imagine this being an improvement to the current situation. The UK economy will perform better than Europe this year, as the trade war drags the eurozone into recession, Tomasz Wieladek, chief European economist at T. Rowe Price, has predicted. Wieladek predicts the UK will see a rise in cheaper imports, as goods producers look to avoid US tariffs: The UK will be least affected by the new policies. I believe the overall negative effect on the UK economy will only be about 0.2-0.5% this year. This is mainly because trade diversion to the US via the UK is likely to be now significant. Plants producing anything in the UK will be more competitive than in the EU, which will support some domestic investment. The UK is a trade deficit country, and President Trump has just created significant excess capacity across the world. UK households will now benefit from much cheaper goods, raising disposable income. Most importantly, the UK government implemented a large fiscal stimulus package six months ago, just in time to absorb the tariff hit. Despite the headwinds, the UK will do better in 2025 than the EU. A mild recession in the euro area in 2025 is now probable. The ECB will cut rates below the neutral rate to 1-1.5%. German economy minister Robert Habeck has suggested that US president Donald Trump will buckle under pressure from Germany and Europe as his trade war escalates. Habeck told a news conference: “That is what I see, that Donald Trump buckles under pressure, corrects his announcements under pressure, but the logical consequence is that he must also feel the pressure, and this pressure must now be exerted from Germany, from Europe.” Wall Street’s ‘fear gauge’ has jumped sharply, a sign that there will be more volatility on the US stock markets. The VIX index has jumped by around 19%, which Reuters says puts it on track for its biggest one-day gain since late January. The Saxo Strategy Team say: S&P 500 and Nasdaq futures dropped over 3% overnight, driving a surge in demand for protection. Today’s volatility will hinge on reactions from major economies like the EU, China, and Japan. The Spanish Wine Federation (FEV) has described Trump’s imposition of a 20% tariff on EU products as a “significant blow to Spanish wineries”, for whom the US is the second largest export destination, and the No 1 export destination when it comes to sparkling wines. The FEV’s director general, José Luis Benítez, said today: “The tariffs announced by the US are completely unjustified in the specific case of wine, considering that the current tariff gap between the tariffs applied by the EU and the US is minimal.” Benítez warned that the measure would harm not only Spanish wine-makers but also US consumers, “who consume more wine than they produce”. He also pointed out that the newly announced tariffs would be particularly damaging to small and medium-sized producers, which make up 99% of Spain’s wineries, as they have less capacity to diversify their exports and are more dependent on the main export markets. The US market represents approximately 13% of Spain’s total foreign sales. In 2024, 97 million litres of wine were exported for a value of around €390m. Japanese prime minister Shigeru Ishiba has said he is disappinted not to win an exemption from President Donald Trump’s new tariffs. Ishiba also promised measures to help domestic industry deal with the fallout fromm the new 24% tariff which the US is imposing on imports from Japan. Ishiba told reporters: “We had been requesting that the U.S. government review its unilateral tariff measures at various levels and we are extremely disappointed and regret that such measures have been implemented nonetheless.” He added that he will speak with president Trump as and when appropriate, saying: “We will continue to strongly urge the U.S. to review its measures.” While shares are sliding today, there’s a big rally into government bonds. The prices of US Treasury bills, UK gilts, German bunds, and other eurozone government debt are all rallying today. This is pulling down bond yields (the rate of return on the debt), with 10-year UK gilt yields down 6 basis points at 4.581%. That might, superficially, sound like good news for finance ministers, as it shows new borrowing will be cheaper. The problem, though, is that bond prices are rising/yields are falling as investors fear the global trade war will lead to a global recession, prompring interest rate cuts. Kathleen Brooks, research director at XTB, says US trade policy has thrown “a grenade into the global economy”. Brooks explains: The bond market is a big winner. Yields are falling sharply everywhere. The UK and European 2-year yields are lower, as the market rushes to price in rate cuts from the ECB and the BOE, as central banks are likely to step up to ease some of the pain from the US’s new global trade policy. 10-year yields are also lower, for example the 10-year Gilt yield in the UK is down 6bps so far on Thursday. The UK yield curve is flattening, which is a sign that bond investors are pricing in the chance of a recession. US yields are also lower, but not by the same amount as Europe, suggesting that bond investors could be worried about the inflationary impact on the US economy. There’s some surprise this morning that the White House appears to have used a rather blunt tool to calculate its new reciprocal tariffs. Last night, Donald Trump brandished a board showing (he claimed) the tariffs which other countries were charging on the US. The new US tariffs have been set at half that rate. However, rather than in-depth calculations, US officials have invented a formula based on the size of each country’s trade surplus. Basically, the White House has taken the US’s goods trade deficit with each country and then divided it by the total amount of goods imported from that country. [and then halved it, to get the new US tariff for each country, with a 10% minimum]. Deutsche Bank have crunched the numbers, and confirm: Put simply, the bigger the nominal trade deficit a country has with the US adjusted for the absolute size of that country’s imports, the bigger the tariff. The BBC’s Faisal Islam has posted the formula: Deutsche Bank say this approach to calculating the tariffs “raises serious concerns about policy credibility, undermining the USD [the dollar].” They draw three conclusions: First, the US administration is squarely focused on penalizing countries with larger trade deficits in goods (services are ignored). This determination is highly mechanical, rather than a sophisticated assessment of tariff and non-tariff barriers. It is also in line with the declaration of a national emergency on the trade deficit used as a legal justification for the tariffs. Second, there is a very large disconnect between communication in recent weeks of an in-depth policy assessment of bilateral trade relationships with different countries versus the reality of the policy outcome. We worry this risks lowering the policy credibility of the administration on a forward-looking basis. The market may question the extent to which a sufficiently structured planning process for major economic decisions is taking place. After all, this is the biggest trade policy shift from the US in a century. Crucially, major additional fiscal decisions are lining up over the next two months. Third, the tariff calculation approach arguably makes for a more free-wheeling and open-ended nature to potential trade negotiations in coming months. It seems there are no specific and identifiable policy asks per se but ultimately a desire to reduce bilateral trade imbalances. The Scottish whisky and salmon industries are “disappointed” with President Trump’s decision to impose 10% tariffs on British imports but have backed Keir Starmer’s efforts to win concessions from the US. The Scotch Whisky Association said: “The industry is disappointed that Scotch whisky could be impacted by these tariffs. We welcome the intensive efforts by the UK government to reach a deal with the US administration, and we continue to support this measured and pragmatic approach towards a mutually beneficial resolution.” Tavish Scott, chief executive of Salmon Scotland, said: “We have great confidence that Americans will continue to buy nutritious Scottish salmon, particularly when the country is reliant on imports to meet US consumer demand. “Salmon producers want a business-like and stable trade relationship with the USA, so we support the UK government’s efforts to achieve that outcome through a calm and measured approach.” Both sectors rely very heavily on US sales, particularly at the luxury end of their markets. The US is their second largest foreign customer. Industry bodies had been briefed by UK government officials that Trump’s tariffs on the UK could hit 20% so are likely to be relieved they were half that. Scotland exports around £4bn worth of goods to the US, with whisky nearly a quarter of that trade at £971m last year. The US also bought £225m worth of Scottish salmon, which is the UK’s largest global food export by value, in 2024. The tariffs will hit US businesses which rely on whisky and salmon. Kentucky bourbon makers sell their used barrels to Scotland for malt whisky maturation, so a fall in sales could hit that. High end US restaurants use premium Scottish salmon, airfreighted in from the UK. Economists have calculated that the US tariffs would hit their highest level in over a century if the measures announced by Donald Trump last night are implemented in full. Capital Economics have calcualted that the effective tariff rate on all imports will rise from 2.3% last year to around 26%, leaving it at a 131-year high, once you add the new reciprocal tariffs to the earlier hikes on goods from China, and the product-specific tariffs on steel, aluminum and autos. They told clients: Stepping back, the main message from President Trump’s “Liberation Day” announcement was that US tariffs were increased by more than even we had anticipated. Since election day, we have built our forecasts on an assumed that the US would impose a tariff of 60% on imports from China and 10% on imports from all other countries. That would take the effective US tariff rate to around 17%. Instead, the system of reciprocal tariffs that was announced, together with the additional product-specific tariffs that appear imminent, will take the effective US tariff rate to just under 25%. That, according to this chart from Capital Economics, would take the effective tariff rate higher than under the infamous Smoot-Hawley Tariff Act of 1930. The Smoot-Hawley Tariff Act was brought in early in the Great Depression, as a protectionist measure to help US companies. But it is generally accepted it worsened the slump, which followed the Great Crash of 1929, by weakening global trade. As Dr Eric Golson, Associate Professor of Economics at the University of Surrey, recently explained: History has shown that trade wars come with long-term economic pain. The Great Depression was exacerbated by an international tariff war, with global trade plummeting by 66% between 1929 and 1933, crippling American businesses and driving unemployment to catastrophic levels. UBS have also calculated that the“US weighted average import tariff is back to pre-WW I levels”. They told clients: Combining all the tariffs, we believe the weighted average tariff for the US has increased to 24%, from just 2.5% at the start of the year, a 21.5pp increase, and equivalent to a $715bn increase in dollar terms. Israeli finance minister Bezalel Smotrich has said he is convening ministry officials to formulate a course of action to protect Israel’s economy in the wake of President Donald Trump’s decision to impose tariffs on exports. As part of a sweeping new tariff policy, Israeli goods exports to the United States will be subject to a 17% tariff. Smotrich said he would discuss with ministry officials, after speaking with economic leaders, how to “analyse opportunities and risks and formulate courses of action, both in relation to President Trump and his team and regarding the necessary steps to strengthen Israel’s industry”. Pharmaceuticals companies are avoiding the sell-off this morning, after avoiding the tariffs announced last night. The fact sheet issued by the White House last night explains: Some goods will not be subject to the Reciprocal Tariff. These include: (1) articles subject to 50 USC 1702(b); (2) steel/aluminum articles and autos/auto parts already subject to Section 232 tariffs; (3) copper, pharmaceuticals, semiconductors, and lumber articles; (4) all articles that may become subject to future Section 232 tariffs; (5) bullion; and (6) energy and other certain minerals that are not available in the United States. That has prompted a small relief rally; in London, GSK are up 1.5% while AstraZeneca has risen by 0.6%. Switzerland’s Novartis has gained 0.65%. But this could be short-lived, as Trump might yet announce more sector-specific tariffs. As Bloomberg explains: The president is looking into launching a so-called 232 investigation into pharmaceuticals and other sectors, including semiconductors and potentially critical minerals, according to a senior administration official. That action could lead to tariffs under the Trade Expansion Act, as it already has for cars and aluminum. City investors are ratcheting up bets on interest rate cuts by major central banks, as policymakers try to fend off a global recession. The money markets are now pricing in a 92% chance that the European Central Bank cuts eurozone interest rates at its meeting later this month, up from 80% on Wednesday. The chances of a Bank of England rate cut in early May have also risen, to 77%. Standard Chartered, the Asia-Pacific focused lender, are the biggest faller on the FTSE 100 this morning, down 7.5% That reflect concerns that parts of Asia has been hit particularly hard by Trump’s new traade levies. As ING analysts told clients: President Trump’s punitive tariffs hit Asia, with largest levies on Vietnam and smaller textile exporters. The largest economies in the region, such as India, Japan, and South Korea, fared better. Overall, downside risks to growth and inflation could accelerate monetary policy easing and add to depreciation pressures on currencies. European stocks have joined the global sell-off with gusto. The pan-European Stoxx 600 index has fallen 1.5% at the start of trading, to its lowest level in over two months. Germany’s DAX fell almost 2.5% at the start of tading in Frankfurt, while in Paris the CAC 40 is down 2.2% and Spain’s IBEX lost 1.5%. Roman Ziruk, senior market analyst at global financial services firm Ebury, says: “Trump’s “Liberation Day” announcements landed at the very negative end of market expectations, with the average tariff rate rising to over 20% from just 2.5% before Trump took office, the highest level since the early 20th century. “Asian countries were hit the hardest, with some seeing punishing reciprocal tariffs of over 40% and China being hit with a massive 34% levy on top of the 20% already imposed since the start of Trump’s second term. “On the other side of the spectrum are the UK and major Latin American countries, which were slapped with at most a 10% duty, with the EU in the middle at 20%. Shares are falling in London at the start of trading, as City investors react to the swathe of tariffs announced by Donald Trump last night. The FTSE 100 index of blue chip shares has plunged by almost 1.5% at the start of trading, down 125 points at 8481 points. Mining companies such as Anglo American (-4.7%) and Antofagasta (-4.6%) are among the big fallers, along with banks such as Barclays (-4.1%) and HSBC (-3.5%). That reflects fears that a trade war increases the risk of a global downturn, leading to more bad debt and less demand for commodities. Daniel Murray, Deputy CIO & Global Head of Research at EFG, the Zurich-based global private banking group, says: “The risk of a US and global recession has increased directly as a result of the US tariffs, as has the likelihood that inflation stays higher for longer. In turn, the possibility of stagflation makes life very difficult for central banks.” Murray adds that the next few months are therefore likely to be volatile: as (a) the tariffs starts to impact the global activity and inflation (b) other countries impose retaliatory measures on the US, potentially stoking a long drawn out phase of deglobalisation (c) the international political order re-aligns and countries reassess the nature of their relationship with the US, not just with regard to trade but more broadly including the implications for defence and the existing world order. UK prime minister Sir Keir Starmer has told business chiefs in Downing Street: “Last night the President of the United States acted for his country, and that is his mandate. “Today, I will act in Britain’s interests with mine.” PA Media reports that Sir Keir said as the Government moved “to the next stage of our plan”, the “decisions we take in coming days and weeks will be guided only by our national interest, in the interests of our economy, in the interests of businesses around this table, in the interests of putting money in the pockets of working people”. He added: “Nothing else will guide me, that is my focus. “Clearly, there will be an economic impact from the decisions the US has taken, both here and globally. “But I want to be crystal clear: we are prepared, indeed one of the great strengths of this nation is our ability to keep a cool head.” European stock markets are set to join the global selloff in around 20 minutes when trading opens. The futures markets are indicating that the EuroSTOXX50, which tracks the largest fifty listed companies in the eurozone, will drop around 1.8%. Shares are also forecast to slide in London, where FTSE 100 futures are currently down around 1%. Wall Street is also heading for a chilly bath – S&P 500 futures were down 3% last night. The mood is highly anxious, as Susannah Streeter, head of money and markets at Hargreaves Lansdown, reports: ‘’A brutal round of trade top Trumps is sending a shiver through global markets. As threats have turned into facts, the plan for blanket tariffs on US trading partners has unnerved investors. As Trump has ripped up trade norms, it’s spread fresh worries about the implication for the global economy. Futures trades indicate a sharp fall for the S&P 500 with other indices around the world looking set to follow suit. A baseline 10% tariff is the starting point, with 20% tariffs set to land on imports from the EU, and much steeper duties imposed on countries in Asia with China facing 34% duties. There will also be 25% tariffs slapped on foreign made cars sold in the US. British business minister Jonathan Reynolds has warned the tariffs announced by Donald Trump last night is a threat to the UK, because of the damage it will cause to global trade. Speaking to Times Radio this morning, Reynolds explained that anything that disrupts the global trading system is a threat to the UK. And even though the UK was hit with a smaller tariff than many other countries – 10%, rather than the EU’s 20% - Reynolds said he was “disappointed” to be tariffed at all. He said: Any barrier to trade, particularly between the UK and our major trading partner, which the US is, is a disappointment to me. It’s a challenge. “So, I recognise that the UK is in a better position than a lot of other countries from what was announced last night, but I was still disappointed.” Reynolds said the UK should ignore calls to trigger a larger trade war by retaliating. Instead, he said the British government woud stay calm and to talk to the US, and continue the work towards reaching an economic deal. With the dollar sliding on the international markets, the British pound has hit its highest since last October. Sterling has gained almost one cent so far today, touching $1.31 for the first time since last October. The euro is up almost a cent too, at $1.095, as the dollar suffers a post-Liberation Day hangover. Michael Brown, senior research strategist at Pepperstone, says financial market participants “view the dollar not as a haven, but as the asset most exposed to the utter incoherence and nonsense emanating from the White House.” Norway – which is not an EU member – has said it will seek to negotiate with the US regarding the 15% tariff imposed on it. “This is bad news, it is very serious,” prime minister Jonas Gahr Støere told public broadcaster NRK. He added: There is an opening for negotiations here, the Americans say, and we will use that in every possible way that we can. António Costa, president of the European Council, has said the EU will remain a “staunch advocate for free and fair trade” and urged the bloc to move forward with trade deals with South America, Mexico and India. In a post on X he said: Trade is a powerful engine of global prosperity. The EU will remain a staunch advocate for free and fair trade. We will engage with all our partners and continue to strengthen and expand our trade network. Now is the time to move forward with the agreements with #Mercosur, #Mexico and decisively advance in the negotiations with #India and other key partners. Thailand, which was hit with tariffs of 36%, has said its exporters should seek new markets, adding that it had prepared “mitigation measures” to support those who rely mainly on the US. The US is the country’s largest export market, with the country exporting electronics, machinery and agricultural goods. In its statement, the Thai government said it understood the US’s wish to “rebalance trade relationships” and that it had “expressed its readiness to engage in dialogue with the United States at the earliest opportunity to achieve a fair trade balance”. If you’re just joining us, here’s a rundown of the latest developments: US President Donald Trump has unveiled sweeping tariffs on some of the country’s largest trading partners. Trump said he would impose a 10% universal tariff on all imported foreign goods in addition to “reciprocal tariffs” ranging from 20% to more than 40% on dozens of countries. China was hit with a 34% fee, in addition to a 20% tariff on all Chinese imports already in place, while the EU will now be levied at 20% and Japan at 24%. Trump said America had been “looted, pillaged and raped” by its trading partners: “In many cases, the friend is worse than the foe.” The 10% universal tariff will go into effect on 5 April while the reciprocal tariffs will begin on 9 April. Stocks dived after the announcement, with technology shares particularly hard hit, while the price of gold hit a record high as investors scrambled for safety. Japan’s Nikkei was down 2.8% on opening, Hong Kong’s Hang Seng Index slid 1.6%, South Korea’s Kospi fell 2% and Australian shares fell 2%. US tariffs are a “major blow” to the world economy and the EU is preparing counter measures that will apply if negotiations fail, EU Commission chief Ursula von der Leyen has said. “The global economy will massively suffer, uncertainty will spiral and trigger the rise of further protectionism,” she said. China’s commerce ministry called for Washington to “immediately cancel” the new tariffs, warning they “endanger global economic development” and would hurt US interests and international supply chains. It called for dialogue and added: “There is no winner in a trade war, and there is no way out for protectionism.” War-torn and economically struggling countries are among those facing the highest tariffs. Myanmar, which is in the middle of a civil war and which was hit by an earthquake last week, was hit with a rate of 44%, while Sri Lanka is facing a 44% tariff and Lesotho a rate of 50%. The tariffs also hit the Heard Island and McDonald Islands, a group of barren, uninhabited volcanic islands near Antarctica, which form an external territory of Australia, as well as Norfol Island, which said it had no known exports to the US. Albanese said on Thursday: “Norfolk Island has got a 29% tariff. I’m not quite sure that Norfolk Island, with respect to it, is a trade competitor with the giant economy of the United States, but that just shows and exemplifies the fact that nowhere on earth is safe from this.” Many people have been asking how the Trump administration worked out its tariffs, while many countries have been arguing the numbers bear no relationship with reality. New Zealand’s trade minister insisted his country did not apply a 20% tariff to US imports, as suggested by Washington, while Australia’s prime minister, Anthony Albanese, insisted the US tariffs had “no basis in logic” and that “a reciprocal tariff would be zero, not 10%.” One journalist claims to have discovered the answer, and analysts are suggesting he is likely correct. “They didn’t actually calculate tariff rates + non-tariff barriers, as they say they did. Instead, for every country, they just took our trade deficit with that country and divided it by the country’s exports to us,” financial writer James Surowiecki wrote in a post on X. “So we have a $17.9 billion trade deficit with Indonesia. Its exports to us are $28 billion. $17.9/$28 = 64%, which Trump claims is the tariff rate Indonesia charges us.” Then that number was divided in half as Trump said he was being “kind”. He also said the tariff calculations included “currency manipulation and trade barriers”. An explanation of the calculations later posted on the office of the US trade representative appeared to confirm that the administration had used trade deficits divided by imports. Mike O’Rourke, chief marketing strategist at Jones Trading, was quoted by CNN as saying: While these new tariff measures have been framed as ‘reciprocal’ tariffs, it turns out the policy is actually one of surplus targeting ... There does not appear to have been any tariffs used in the calculation of the rate. The Trump administration is specifically targeting nations with large trade surpluses with the United States relative to their exports to the United States. The US tariffs are “highly unreasonable” and the government plans “serious negotiations” with Washington, Taiwan has said. Cabinet spokeswoman Michelle Lee said: The Executive Yuan found the decision highly unreasonable and deeply regretted it, and will initiate serious negotiations with the United States. The tariffs announced on Wednesday included a 32% levy on Taiwan. Semiconductor chips, a sector that Taiwan dominates and has been a source of friction between Washington and Taipei, were excluded from the levies. But, analysts warned that tariffs on components would have a knock-on effect for the critical chip industry. Taiwan had drawn up plans to help local industries hit by possible US tariffs, minister of cconomic affairs Kuo Jyh-huei said Tuesday, ahead of Trump’s announcement. Steep US tariffs on imported automobiles have officially kicked in. The 25% tariffs took effect at 12:01am ET (0401 GMT) on foreign-made cars and light trucks, with automobile parts to be hit no later than 3 May, according to a Federal Register notice, AFP reported. Ursula von der Leyen says the US and the EU over the past 80 years have greatly benefited from their trading relationship, with consumers enjoying reduced prices and businesses benefiting from “huge opportunities” leading to “unprecedented growth and prosperity”. At the same time we know that the global trading system has serious deficiencies. I agree with President Trump that others are taking unfair advantage of the current rules and I’m ready to support any efforts to make the global trading system fit for the realities of the global economy. But I also want to be clear. Reaching for tariffs as your first and last tool will not fix it. This is why from the outset we have always been ready to negotiate with the United States to remove the remaining barriers to trans-Atlantic trade. A bit more from von der Leyen’s press conference. She said all businesses “big and small” would suffer “from day one”, affected by disruptions to supply chains and greater uncertainty as well as “burdensome bureaucracy”. The costs of doing business with the United States will “drastically increase”, she said. What is more there seems to be no order in the disorder. No clear path through the complexity and chaos as all US trading partners are hit. For weeks, Donald Trump and his aides sought to brand Wednesday as “liberation day” in America. Many in the US could be forgiven for wondering what exactly they’ve just been liberated from. Trump likes to present the world as black and white. The US is either winning or losing. A policy, deal or plan is the best or the worst. A person, country or company is supporting or screwing you. There is rarely space for nuance, time for complexity, or tolerance for inconvenient facts. The simplicity of this narrative is its power. By Trump’s telling, the US is about to raise trillions of dollars for the federal government by taxing the world, not its citizens: a typically black and white choice. But reality is often more complex than rhetoric. There are myriad shades of gray. Import tariffs are not paid by other countries. They are paid by importers – in this case, US firms and companies – buying goods from overseas. These costs often trickl