International stock markets have fallen dramatically overnight amid fears of a global trade war following Donald Trump’s sweeping tariffs, which he called “medicine”.
Japan’s Nikkei 225 stock index dived nearly 8%, Australia’s S&P/ASX 200 fell more than 6%, and South Korea’s Kospi lost 4.4%.
Meanwhile US stock market futures signalled further weaknesses, with the future for the S&P 500 losing 4.2% and the Dow Jones Industrial Average falling 3.5%, while the future for the Nasdaq lost 5.3%.
Mr Trump warned foreign governments would have to pay “a lot of money” to lift his tariffs, which he described as “medicine”.
“I don’t want anything to go down. But sometimes you have to take medicine to fix something,” he said on Air Force One.
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The US president said he had spoken to leaders from Europe and Asia over the weekend who had hoped to convince him to lower the tariffs, which are due to come into effect this week.
“I spoke to a lot of leaders, European, Asian, from all over the world,” Mr Trump said. “They’re dying to make a deal. And I said, we’re not going to have deficits with your country. We’re not going to do that because to me, a deficit is a loss. We’re going to have surpluses or, at worst, going to be breaking even.”
Mr Trump, who spent much of the weekend playing golf in Florida, posted on his Truth Social platform: “WE WILL WIN. HANG TOUGH, it won’t be easy.”
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On Saturday, US customs agents began collecting Mr Trump’s unilateral 10% tariffs on all imports from many countries.
Higher “reciprocal” tariffs of between 11% and 50% on individual countries are due to come into effect on Wednesday.
Mr Trump’s tariff announcements have jolted economies around the world, triggering retaliatory levies from China and
sparking fears of a global trade war and recession.
Investors and political leaders have struggled to determine whether the tariffs are here to stay, or are part of a permanent new regime or a negotiating tactic to win concessions from other countries.
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It comes after Sir Keir Starmer promised “bold changes” as he announced he will relax rules around electric vehicles after carmakers were hit by Mr Trump’s tariffs.
The prime minister said “global trade is being transformed” after the US president‘s 25% levy on imported cars, and 10% tariff on other products, came into force.
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Meanwhile, KPMG warned US tariffs on UK exports could see GDP growth fall to 0.8% in 2025 and 2026.
The accountancy firm said higher tariffs on specific categories, such as cars, aluminium and steel, would more than offset the exemption on pharmaceutical exports, leaving the effective tariffs imposed on UK exports at around 12%.
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Yael Selfin, chief economist at KPMG UK, said: “Given the economic impact that tariffs would cause, there is a strong incentive to seek a negotiated settlement that diminishes the need for tariffs. The UK automotive manufacturing sector is particularly exposed given the complex supply chains of some producers.”
