President Donald Trump's new tariffs announced on Wednesday sent shockwaves through global markets amid worries the aggressive duties will slow growth, hit corporate earnings and stoke inflation, with one analyst calling the move markets' "worst-case scenario."
Global markets have been whiplashed since Trump took office and kept up a stream of rhetoric that threatened to unleash a global trade war. Trump's new levies crystallized those fears.
He set a baseline of 10% across all imports and higher duties on some of the U.S.'s biggest trading partners.
Taken together, the duties will erect new barriers around the world's largest consumer economy, reversing decades of trade liberalization that have shaped the global order following World War Two.
In interviews, several investors and analysts said the rhetoric around tariffs had already caused an economic slowdown, hitting both consumer and corporate confidence. The big unknown now is how trading partners will react, they said.
While Wednesday's announcement provided a baseline, it is likely to be followed by months of negotiations and debilitating uncertainty.
"It's created bad sentiment on the future, which slows down things," said John Luke Tyner, fixed income analyst at Aptus Capital Advisors in Fairhope, Alabama. "You've seen slowdowns in projects, capital projects, CEOs' commentary on markets and the economy."
Jay Hatfield, CEO at Infrastructure Capital Advisors, spoke bluntly of the impact. "This is the worst-case scenario that the market was expecting, and that's enough to potentially send the U.S. into a recession and that's why the futures are so weak," he said.
In the United States, stocks future fell as Trump spoke, with S&P 500 E-minis down 3.5%. In currencies, the dollar fell 0.9% against the yen at 148 yen, while the Mexican peso was about 0.4% lower. Prices of safe-havens assets such as gold and Treasury rose.
In his speech at the White House Rose Garden, Trump cast the levies in terms of fairness, arguing that the "reciprocal" tariffs were a response to duties and other non-tariff barriers put on U.S. goods.
"In many cases, the friend is worse than the foe in terms of trade," Trump said, calling it a declaration of independence.
Initially, as Trump spoke investors latched onto the 10% baseline tariff number, which was less than what they had feared.
But Trump then unveiled much higher tariffs against some of the country's biggest trading partners. Some of China's neighbors and biggest trading partners such as Bangladesh, Vietnam, Laos and Cambodia were slapped the highest tariffs.
Some multinational companies have moved their supply chains to these countries as they looked to diversify away from China amid Sino-U.S. tensions that ratcheted up under Trump's first administration.
Exchange-traded funds on these markets listed in New York slumped on the news.
"These figures aligned more closely with aggressive tariff scenarios, putting pressure on risk assets while temporarily supporting the dollar," said Uto Shinohara, senior investment strategist at Mesirow Currency Management in Chicago.
Analysts expect trading partners to respond with countermeasures that could lead to dramatically higher prices for everything from bicycles to wine.
"We've just got one side of the story, which is what we're doing. And the other side of the story is how other countries respond to what we're doing," Walter Todd, chief investment officer at Greenwood Capital in Greenwood, South Carolina, said. "So that's a big component to how the market ultimately digests what is being said right now."
Don Calcagni, chief investment officer at Mercer Advisors, said the tariffs bode ill for the global economy.
"We are very early innings on what could unfortunately turn into a very serious global trade war," Calcagni said.
The developments come at a particularly crucial moment for investors in U.S. stocks. In mid-March the S&P 500 confirmed a correction, a drop of 10% from a recent high. The index finished Wednesday's regular trading session 8% below its February record high.
"The tariffs are so comprehensive and so much larger than we expected. People were talking earlier about whether clarity would boost the market. But now you have clarity, and no one likes what they see," said Jeanette Garretty, chief economist at Robertson Stephens.
Global markets have been whiplashed since Trump took office and kept up a stream of rhetoric that threatened to unleash a global trade war. Trump's new levies crystallized those fears.
He set a baseline of 10% across all imports and higher duties on some of the U.S.'s biggest trading partners.
Taken together, the duties will erect new barriers around the world's largest consumer economy, reversing decades of trade liberalization that have shaped the global order following World War Two.
In interviews, several investors and analysts said the rhetoric around tariffs had already caused an economic slowdown, hitting both consumer and corporate confidence. The big unknown now is how trading partners will react, they said.
While Wednesday's announcement provided a baseline, it is likely to be followed by months of negotiations and debilitating uncertainty.
"It's created bad sentiment on the future, which slows down things," said John Luke Tyner, fixed income analyst at Aptus Capital Advisors in Fairhope, Alabama. "You've seen slowdowns in projects, capital projects, CEOs' commentary on markets and the economy."
Jay Hatfield, CEO at Infrastructure Capital Advisors, spoke bluntly of the impact. "This is the worst-case scenario that the market was expecting, and that's enough to potentially send the U.S. into a recession and that's why the futures are so weak," he said.
In the United States, stocks future fell as Trump spoke, with S&P 500 E-minis down 3.5%. In currencies, the dollar fell 0.9% against the yen at 148 yen, while the Mexican peso was about 0.4% lower. Prices of safe-havens assets such as gold and Treasury rose.
In his speech at the White House Rose Garden, Trump cast the levies in terms of fairness, arguing that the "reciprocal" tariffs were a response to duties and other non-tariff barriers put on U.S. goods.
"In many cases, the friend is worse than the foe in terms of trade," Trump said, calling it a declaration of independence.
Initially, as Trump spoke investors latched onto the 10% baseline tariff number, which was less than what they had feared.
But Trump then unveiled much higher tariffs against some of the country's biggest trading partners. Some of China's neighbors and biggest trading partners such as Bangladesh, Vietnam, Laos and Cambodia were slapped the highest tariffs.
Some multinational companies have moved their supply chains to these countries as they looked to diversify away from China amid Sino-U.S. tensions that ratcheted up under Trump's first administration.
Exchange-traded funds on these markets listed in New York slumped on the news.
"These figures aligned more closely with aggressive tariff scenarios, putting pressure on risk assets while temporarily supporting the dollar," said Uto Shinohara, senior investment strategist at Mesirow Currency Management in Chicago.
Analysts expect trading partners to respond with countermeasures that could lead to dramatically higher prices for everything from bicycles to wine.
"We've just got one side of the story, which is what we're doing. And the other side of the story is how other countries respond to what we're doing," Walter Todd, chief investment officer at Greenwood Capital in Greenwood, South Carolina, said. "So that's a big component to how the market ultimately digests what is being said right now."
Don Calcagni, chief investment officer at Mercer Advisors, said the tariffs bode ill for the global economy.
"We are very early innings on what could unfortunately turn into a very serious global trade war," Calcagni said.
The developments come at a particularly crucial moment for investors in U.S. stocks. In mid-March the S&P 500 confirmed a correction, a drop of 10% from a recent high. The index finished Wednesday's regular trading session 8% below its February record high.
"The tariffs are so comprehensive and so much larger than we expected. People were talking earlier about whether clarity would boost the market. But now you have clarity, and no one likes what they see," said Jeanette Garretty, chief economist at Robertson Stephens.
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