Trump tariffs send markets reeling amid fears of global trade war, recession

SINGAPORE – Stock markets slumped around the world on growth fears after US President Donald Trump announced

10 per cent tariffs on all imports

, with much higher rates for some trading partners, igniting a potentially ruinous global trade war.

Singapore’s Straits Times Index fell 1.1 per cent when trading opened on April 3, but recovered most of its losses and closed down 0.3 per cent.

The Republic’s imports to the US will be levied the minimum 10 per cent tariff on all goods coming into the US from anywhere in the world, though Singapore’s economic growth is likely hit to take a hit from the expected slowdown in global trade.

Imports from about 60 trade partners that the White House described as the “worst offenders” face higher rates, including a 34 per cent tax for China, a 24 per cent tariff for Japan and 20 per cent for the European Union.

Japan’s benchmark Nikkei 225 closed 2.8 per cent lower, paring losses of more than 4 per cent earlier. South Korea’s Kospi index fell 0.8 per cent, after losses of more than 3 per cent, while Australia’s S&P/ASX 200 lost 0.9 per cent.

China’s big domestic economy and the hope of support from Beijing limited losses in Hong Kong stocks to about 1.5 per cent and in Shanghai to around 0.5 per cent.

In Europe, where the 27-country EU bloc now faces a 20 per cent reciprocal levy, bourses lurched between 1.3 per cent and 2 per cent in early trading.

In the US, futures tied to the Dow Jones Industrial Average plunged 1,073 points, or 2.5 per cent, while the S&P 500 futures dropped 3.1 per cent and Nasdaq-100 futures sank 3.4 per cent.

Analysts at JPMorgan said the tariffs were, “significantly higher than the realistic worst-case scenario” they have been envisaging.

Credit rating agency Fitch warned they were a “game-changer” for both the US and global economy, while Deutsche Bank called them a “once-in-a-lifetime” event that could easily knock between 1 per cent-1.5 per cent off US growth this year.

“Many countries will likely end up in a recession,” Fitch’s Olu Sonola said. “You can throw most forecasts out the door if this tariff rate stays on for an extended period of time.”

The scramble for ultra-safe government bonds that provide a guaranteed income drove US Treasury yields down towards 4 per cent and Germany’s 10-year yield, the European benchmark borrowing rate, went 8.5 basis points lower to 2.64 per cent.

The sweeping tariffs will raise effective import taxes in the world’s largest economy to the highest levels in a century. If they do trigger recessions, central banks around the world are likely to slash interest rates which benefits bonds.

With countries from China and Canada to Europe all promising countermeasures, investors were selling exposure to global growth.

Oil, a proxy for economic activity, dropped as much 3 per cent to put benchmark Brent futures back below US$73 a barrel and on course for its worst day of the year so far.

Gold hit a record high above US$3,160 an ounce before running out of steam while Japan’s yen jumped more than 1.5 per cent to 147.01 per dollar as foreign exchange traders looked for safety outside the US dollar.

The Swiss franc, another traditional safety play, touched its strongest level in four months as the euro jumped 1 per cent too to US$1.0970.

“Eye-watering tariffs on a country-by-country basis scream ‘negotiation tactic’, which will keep markets on edge for the foreseeable future,” said Adam Hetts, global head of multi-asset and portfolio manager at Janus Henderson Investors.

China held its currency relatively steady, containing the yuan’s drop to about 0.4 per cent despite total tariffs of above 50 per cent on Chinese exports and 46 per cent for Vietnam - seen as shutting down a popular work-around route.

“The key focus over the next few days should clearly be China,” said Deutsche Bank strategist George Saravelos.

“How willing will China be to wait for trade negotiations ... or to absorb this?,” he said. “Or will it try to ‘export’ the shock ... via a devaluation of the yuan.” REUTERS