Stock markets plunge as China announces retaliatory 34% tariffs on US goods

Market slump accelerates as China announces retaliatory tariffs

Financial markets are now plunging following news that China has retaliated against the US over the tariffs announced by Donald Trump on Wednesday night.

In London, the FTSE 100 has now shed 313 points, or 3.7%, since the start of trading to 8173 points. That would be its biggest one-day decline since March 2023.

As this chart shows, the selloff has intensified in the last few minutes:

The FTSE 100 this morning Photograph: LSEG

The selloff intensified after China’s finance ministry said it will impose additional tariffs of 34% on all U.S. goods from April 10 as a countermeasure to sweeping tariffs imposed by the US.

China’s State Council Tariff Commission said in a statement:

“This practice of the US is not in line with international trade rules, seriously undermines China’s legitimate rights and interests, and is a typical unilateral bullying practice,”

Banks continue to lead the sell-off in London. Barclays are now down 10% today. with NatWest down 9.5%.

Rolls-Royce, the jet engine manufacturer and services, were briefly down 12%.

Fears of a global economic slowdown are hitting miners; Glencore are off 8.7%.

Key events

Wall Street futures plunge

The New York stock market is expected to fall sharply when trading begins in under three hours.

The futures market shows that the S&P 500 index, and the tech-focused Nasdaq, are on track to fall 2.5%.

Futures for the Dow Jones industrial average are down 950 points, indicating a 2.4% tumble.

China’s new 34% tariff on US goods matches the increase in duties on Beijing which Donald Trump announced on Wednesday.

News of China’s retaliation against the new US tariffs is driving stocks lower across Europe.

The Stoxx 600 index of Europe’s largest six hundred companies has now slumped by 4.4% today.

Germany’s DAX is down 5%.

Market slump accelerates as China announces retaliatory tariffs

Financial markets are now plunging following news that China has retaliated against the US over the tariffs announced by Donald Trump on Wednesday night.

In London, the FTSE 100 has now shed 313 points, or 3.7%, since the start of trading to 8173 points. That would be its biggest one-day decline since March 2023.

As this chart shows, the selloff has intensified in the last few minutes:

The FTSE 100 this morning Photograph: LSEG

The selloff intensified after China’s finance ministry said it will impose additional tariffs of 34% on all U.S. goods from April 10 as a countermeasure to sweeping tariffs imposed by the US.

China’s State Council Tariff Commission said in a statement:

“This practice of the US is not in line with international trade rules, seriously undermines China’s legitimate rights and interests, and is a typical unilateral bullying practice,”

Banks continue to lead the sell-off in London. Barclays are now down 10% today. with NatWest down 9.5%.

Rolls-Royce, the jet engine manufacturer and services, were briefly down 12%.

Fears of a global economic slowdown are hitting miners; Glencore are off 8.7%.

Marketwatch: JPMorgan now see 60% chance of US recession after tariff hikes

JPMorgan’s economics team has just raised their recession probability to 60% following the aggressive tariff stance announced by U.S. President Donald Trump, Marketwatch report.

They add:

In a note entitled, “there will be blood,” chief economist Bruce Kasman and his team said this year’s 22-percentage tariff increase amounts to the largest tax hike since 1968.

“The effect of this tax hike is likely to be magnified — through retaliation, a slide in U.S. business sentiment, and supply chain disruptions. The shock is likely to be only modestly dampened by the flexibility tariff hikes afford for further fiscal policy easing,” they say.

They aren’t make immediate changes to forecasts as the initial implementation — and possible negotation — take hold. “However, we view the full implementation of announced policies as a substantial macroeconomic shock not currently incorporated in our forecasts. We thus emphasize that these policies, if sustained, would likely push the U.S. and possibly global economy into recession this year,” they say.

An index of the largest 50 companies in Europe is now in correction territory, Reuters reports, down 10% from its record closing high.

Euro Stoxx 50 Falls 10% From March Peak, Set For Correction

— LiveSquawk (@LiveSquawk) April 4, 2025

Deutsche Bank has been crunching its forecast numbers, and predicts that US economic growth this year could be less than half as much as previously expected.

Market strategist Jim Reid told clients:

For the US, the movement is stagflationary, and our economists think these could reduce the 2025 GDP forecast (Q4/Q4) from 2.2% to around or under 1%, with core PCE up from 2.7% to around 4%.

So recession risks will likely rise materially if these tariffs are sustained.

And when it comes to the Fed, they think the latest moves make them more likely to cut, even though the direction of travel is highly stagflationary, with the bias now towards up to four cuts this year if this tariff policy holds.

[Core PCE is a measure of US inflation, closely watched by the Federal Reserve]

European markets on track for worst week since 2022

The pan-European Stoxx 600 index, which tracks the largest companies across Europe, is down 2.2% today.

That takes its losses this week to 5.7%, which would be the biggest weekly fall since early March 2022.

European sell-off deepens

Back in European markets, the rout continues.

The FTSE 100 index is now down 1.7% today, a loss of 145 points, to 8328 (still the lowest level since mid-January).

Banks are being battered, with Natwest, Barclays, HSBC and Lloyds Banking Group all down over 5%.

Germany’s DAX is now down 2% and France’s CAC has lost 1.6%.

The sell-off comes as more economists warn that a trade war will hurt growth.

Bank of America told clients this morning:

US tariff increases add to the downside risks for global growth: our economists highlight that the US tariff increases announced this week could lower global GDP growth by at least 50bps, with a potential 100-150bps drag to US GDP growth, a 100bps drag to China and a 40-60bps drag to Euro area GDP growth.

This comes against the backdrop of US growth that has already started to weaken recently on the back of softening consumer spending.

Oil lowest since December 2021

The oil price has now sunk to its lowest level in over three years, amid growing fears that Donald Trump’s trade war will hurt the world economy.

Brent crude, the international benchmark, has now fallen by 3.8% today, down to $67.48 per barrel.

That’s its lowest level since early December 2021, when the world economy was being battered by the Covid-19 pandemic.

Crude prices are being hit by concerns over global trade tensions and its impact on oil demand, reports Joseph Dahrieh, managing principal at brokerate Tickmill.

Traders will have noted the IMF’s warning that Donald Trump’s implementation of swingeing tariffs poses a “significant risk” to the global economy.

The Opec+ group’s decision to increase production next month is also adding to fears of an oil glut.

Dahrieh says:

This pullback reflects market uncertainty and could weigh on global crude prices in the near term, particularly if trade tensions hinder economic growth in key oil-consuming regions. The outlook suggests caution, with volatility likely to increase as markets digest the full implications of the tariffs. Longer-dated futures contracts also saw declines in prices, indicating expectations of long-term risks for crude prices.

Meanwhile, OPEC+’s decision to increase its oil output adds further bearish pressure. The organisation is aiming to supply up to 411,000 barrels per day in May, which is significantly higher than previously planned.

YouGov: Majority of US adults believe tariffs will hurt the average American

A majority of US adults believe tariffs will hurt the average American, a survey from YouGov has found.

YouGov polled 3631 adults in the US yesterday, and found that 57% said tariffs would hurt the average American, while 19% said they would help them, 4% thought they would have no effect and 20% said they were not sure.

The poll also found that 74% said it was either “very likely” or “somewhat likely” that other countries will raise tariffs in retaliation [which would likely hurt US exports].

There’s also a political split – 85% of Democrats reckon tariffs will be painful, while nearly 40% of Republicans think they will help the average American.

Photograph: YouGov

Scotland’s US charm offensive for Tartan Week

Severin Carrell

Scottish political and business leaders are in New York and Washington on a charm offensive linked to the annual Tartan Week festival, hoping to use Scotland’s soft power to dilute Trump’s tariffs and promote a US-UK trade deal, our Scotland editor Severin Carrell reports.

Against the backdrop of the kilt-laden cultural jamboree, John Swinney, Scotland’s first minister, is in New York meeting US investors, hosting a reception with the Scottish Chambers of Commerce and co-hosting a financial services event with the lord mayor of London, Alastair King.

Anas Sarwar, the Scottish Labour leader, was in Washington DC yesterday where he met the UK’s ambassador Peter Mandelson, before heading too to New York. He posted cheery videos on LinkedIn and Instagram with the message: “Diplomacy, dialogue, cool heads and personal relationships are so important.”

Meanwhile the Scottish Chambers of Commerce has signed a “timely” MoU with the New York Chamber of Commerce to “create a bridge” between the two countries linked to Swinney’s trade mission.

Successive first ministers have long used New York’s Tartan Week to promote Scottish interests, and their own. Whisky, Scottish salmon, tourism and inward investment feature heavily.

Trump’s trade wars have given this annual event far greater saliency: the US buys nearly £1bn worth of Scottish whisky a year; Scottish salmon exports (often to Michelin-starred restaurants in New York) brought in £225m last year.

They quietly play on Trump’s significant business and family ties to Scotland – he owns two Scottish golf resorts and occasionally mentions his mother’s birthplace on the Isle of Lewis.

As Swinney put it in a press release this morning:

“It is our largest inward investor and second largest export market, so it is crucial we build on existing relationships to seize future opportunities.”

It remains to be seen how much that soft power can cut through. One senior Scottish industry figure reckons it is superficial, at best:

“The heritage stuff is something to lean into – it’s a link that other nations don’t have – but there is no sense it will help to extricate the UK. It will be a hard headed deal which does, not sentiment.”

The rout in Japanese stocks this week has pushed the Nikkei index to the brink of a full-blown bear market.

The Nikkei 225 index has closed down 2.75% today, which I calculate means it has fallen by 19.996% from its record closing high last July.

A 20% fall would be an official ‘bear market’.

Investors are piling into government bonds again today, pushing up prices and thus lowering yields (the rate of return on the debt).

The yield on US Treasury bills is dropping again today, with 10-year Treasury yields down 10 basis points at 3.95%.

UK government debt is strengthening too, which is lowering the yield on 10-year gilts by 10 basis points to 4.41%.

Falling bond yields are a sign that investors are expecting weaker growth and lower interest rates.

Lower borrowing costs would, on their own, reduce the pressure on chancellor Rachel Reeves to hit her fiscal targets. The problem, though, is that an economic slowdown would hurt tax receipts…

Wall Street future warn of more losses today

The futures market suggests there will be further losses when the New York market opens.

The S&P 500 and the Dow Jones industrial average are on track to drop 0.7%, while Nasdaq future are down 0.5%.

That would add to the hefty losses yesterday, when the S&P 500 slumped 4.8% in its worst session since June 2020, as investors gave their verdict to Donald Trump’s new tariffs.

Paul Donovan, chief economist at UBS Global Wealth Management, says:

Financial markets expected a significant tax increase from US President Trump. Yesterday’s reaction shows the tax increase was worse than anticipated.

US dollar weakness is telling. We often hear that when the US sneezes the global economy catches cold. This is not the US sneezing. This is the US cutting off its own arm. The self-inflicted economic cost naturally weakens the dollar.

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Stock markets plunge as China announces retaliatory 34% tariffs on US goods – business live

Market slump accelerates as China announces retaliatory tariffs

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