FTSE 100 plunges as S&P 500 set to slump
The FTSE 100 opened 1.4 per cent lower this morning as the UK was spared the worst of the economic impact from US president Donald Trump’s sweeping tariff regime.
UK markets have been hit after the country was hit by a sweeping 10 per cent tariff on exports to the US from next week, along with Trump’s 25 per cent tariff on automobiles for all countries.
The move came as a blow to the UK stock market and wider economy, with the domestically focused FTSE 250 falling one per cent. Current exports total £60bn worth of goods to the US each year, including £7.6bn worth of cars last year.
The worst hit stocks on the FTSE 100 include China-focused Standard Chartered, and packaging company Mondi, both down more than six per cent.
Matt Britzman, senior equity analyst at Hargreaves Lansdown, said that while the UK “may seem to have fared better than some,” the economy’s deep ties to the global economy “make a slowdown in growth almost unavoidable”.
European stock markets have been hit even harder. The Eurostoxx 50 index opened down more than two per cent, after the European Union was slapped with a 20 per cent tariff.
However, the crash has been managed by reports that the EU is preparing a package of emergency measures to support sectors that will be hit hardest by the US tariffs.
However, initial indications suggest US markets could be hit hardest. The S&P 500 and Nasdaq are down more than three per cent in futures trading, while government bonds yields have sunk to their lowest since the start of the year.
“The tariffs put in place last night were extraordinary both in terms of scale and in how they were calculated,” said Deutsche Bank analyst Jim Reid.
The tariffs are expected to significantly affect US growth prospects, cutting into GDP by at least 1.5 per cent while hiking inflation by a similar amount, according to Deutsche Bank.
Reid explained that while the level for Western countries had been broadly expected, Asian countries had been hit much more severely, with countries such as Vietnam being hit with a 46 per cent tariff.
Mark Haefele, chief investment officer at UBS Global Wealth Management, said: “Even if tariffs are ultimately reduced by year-end, the near-term shock and associated uncertainty is likely to drive a near-term slowdown in the US economy and reduce full-year 2025 growth to closer to or below one per cent. We would also expect the Federal Reserve to deliver 75-100bps of rate cuts over the remainder of 2025.”
Panmure Liberum said: By our calculations the announced Liberation Day tariffs amount to a 22.4 per cent ad valorem levy on US goods imports. Fully implemented – and financial markets are rightly sceptical whether they will be for any sustained duration – this would take US tariffs to a historic high, exceeding average import levies of 19.8 per cent seen in 1933.
“The economic impact will hinge on trade partner retaliation and/or concessions, US political tolerance for higher inflation, and how economic sentiment responds to these unprecedented events.
“Our base case is that the more durable impact of Liberation Day will be a negative global demand shock that lowers 2025 economic output growth from 3.25 per cent to 2.50 per cent – as investment spending slows, and consumers retrench.”
Japan, which has suffered a 24 per cent tariff, saw its stock market sink upon open this morning, with the Nikkei slumping more than four per cent to an eight-month low.
Gold, traditionally a safe-haven asset, was seemingly the only winner.
In the aftermath of Trump’s tariff announcement, it hit a fresh high, briefly spiking to $3,225 before returning to $3,125.
The market reaction came after stocks closed higher on Wednesday. The market seemed to rally after Treasury Secretary Scott Bessent said to lawmakers that the tariffs were a “cap” that could be negotiated downwards.
“The market was too optimistic,” Reid added.