Market Turmoil Intensifies as Trump Maintains Tariff Strategy

On Monday, global stock markets experienced a significant downturn, with recession fears escalating following China’s retaliation against U.S. President Donald Trump’s tariffs and Europe’s measured response to the escalating trade conflict.

European markets were notably affected, with Asia experiencing even harsher declines. Hong Kong’s Hang Seng Index plummeted by 13.2 percent—its steepest drop since the 1997 Asian financial crisis—while Tokyo’s Nikkei 225 saw a staggering fall of 7.8 percent.

A new 10-percent “baseline” tariff on imports was implemented over the weekend, with additional countries facing increased duties starting Wednesday. Chinese goods will incur a 34 percent tariff, and products from the European Union will face levies of 20 percent.

In retaliation, China announced a 34-percent tariff on U.S. goods set to begin on Thursday. Chinese Vice Commerce Minister Ling Ji stated that these reciprocal tariffs aim to realign the U.S. within the framework of the multilateral trade system, asserting that the core issue of tariffs originates from U.S. policies.

As EU trade ministers convened in Luxembourg to formulate a response, calls emerged—especially from Germany and France—for measures targeting U.S. technology giants. French Trade Minister Laurent Saint-Martin emphasized the need to explore all options regarding goods and services. He asserted that the EU must utilize its comprehensive and potentially aggressive trade toolkit.

German Economy Minister Robert Habeck echoed this sentiment, advocating for the use of a new anti-coercion mechanism that empowers Europe to penalize nations that apply economic pressure against the EU. However, divergence in strategy appeared, with Ireland cautioning against escalating tensions. Irish Trade Minister Simon Harris warned that targeting services could exacerbate the situation when de-escalation is crucial.

EU trade chief Maros Sefcovic remarked that Europe is facing a “paradigm shift” in the global trading landscape.

Concerns of Economic Downturn

Trump reiterated his commitment on Sunday to address trade deficits, stating he would not engage in negotiations unless this issue was resolved. “Sometimes you have to take medicine to fix something,” he remarked, seemingly unfazed by the market’s turmoil. He claimed that global leaders were eager to reach agreements.

Since the announcement of tariffs the previous week, global stock values have plummeted, with losses compounding on Monday. Taipei experienced its largest recorded loss, plummeting by 9.7 percent.

In Europe, Frankfurt’s DAX index initially fell by as much as 10 percent but later adjusted to just under a 4 percent decline around midday, alongside similar trends in Paris and London. U.S. markets were anticipated to open sharply lower.

The primary U.S. oil contract dropped below $60 per barrel for the first time since April 2021, further fueled by recession anxieties. Stephen Innes from SPI Asset Management noted, “The market’s indicating that global demand is disappearing, and a global recession is imminent.”

A Shift in Global Dynamics

U.S. officials reported that over 50 countries have reached out to Trump to initiate negotiations. Japanese Prime Minister Shigeru Ishiba, facing a 24-percent tariff, indicated that Tokyo would propose a set of measures to alleviate U.S. tariffs in advance of a planned call with Trump.

British Prime Minister Keir Starmer cautioned in a newspaper editorial that “the world as we knew it has vanished,” suggesting that the new status quo would increasingly depend on “deals and alliances.”

Vietnam, a key manufacturing hub with a significant trade surplus with the U.S., has formally requested a 45-day delay regarding the hefty 46-percent tariffs it faces.

U.S. Treasury Secretary Scott Bessent commented on NBC’s Meet the Press that Trump has “created maximum leverage for himself,” indicating that the outcome of negotiations will depend on the credibility of the offers made by other countries. He added that addressing long-standing issues with “bad actors” in trade would not be a swift process.