World stocks, the dollar and oil all tumbled on Thursday as President Donald Trump’s drastic new U.S. trade tariffs stoked fears of a global recession and led investors to seek safe-haven assets like bonds and the yen.
A new baseline 10% tariff on imported goods plus some eye-watering reciprocal tariffs on dozens of countries that Trump said had unfair trade barriers left traders rattled by their severity.
Wall Street's S&P 500 and Nasdaq futures were down 3.4% and 3.9% , respectively, ahead of what was expected to be a turbulent U.S. start. A 2% decline had the dollar (.DXY), heading for its worst daily drubbing since November 2022 and toughest start to any year since 1995. /FRX
In Europe, where the 27-country EU bloc now faces a 20% reciprocal levy, bourses lurched between declines of 1.3% and 2.6% as Brussels and other capitals voiced uproar.
In Asia, where some of the harshest tariffs were focused, Tokyo (.N225), dropped 2.7% and faced its worst week in nearly two years. Vietnam was clobbered even harder.
Analysts at JPMorgan said the tariffs were "significantly higher than the realistic worst-case scenario" predicted.
Credit rating agency Fitch warned they were a "game-changer" for the U.S. and global economy, while Deutsche Bank called them a "once in a lifetime" moment that could knock between 1%-1.5% off U.S. growth this year.
"Many countries will likely end up in a recession," said Fitch's head of U.S. economic research, Olu Sonola. "You can throw most forecasts out the door if this tariff rate stays on for an extended period of time."
Shortly afterwards, Fitch downgraded China's credit rating, citing the steep U.S. tariffs as a reason.
CHINA FOCUS
Trump's levies impacted Asia particularly hard. China was hit with a 34% reciprocal tariff, Japan got 24%, South Korea 25% and Vietnam 46%.
Vietnamese stocks (.VNI), slumped 6.7% in response and Nike (NKE.N), , Adidas (ADSGn.DE), and Puma (PUMG.DE), , who all source heavily from Vietnam and other Asian producers, were pummelled as much as 10%.
The risk-sensitive Australian dollar also fell and with China, Canada and Europe all promising countermeasures, investors were selling exposure to global growth.
Oil, a proxy for economic activity, dropped as much 4% to push Brent back below $72 a barrel and firmly on course for its worst day of the year so far.
Gold hit a record high above $3,160 an ounce before running out of steam while Japan's yen jumped more than 1.5% to 147.01 per dollar as foreign exchange traders looked for safety outside the U.S. dollar.
The Swiss franc , another traditional safety play touched its strongest level in four months as the euro surged 2% to $1.10.
"The consequences will be dire for millions of people around the globe," EU chief Ursula von der Leyen said, adding the 27-member bloc was preparing to hit back if talks with Washington failed. "Uncertainty will spiral and trigger the rise of further protectionism."
China held its currency relatively steady, containing the yuan's drop to about 0.4% despite total tariffs of above 50% on Chinese exports and the hit to Vietnam seen as shutting down a popular work-around route.
China's big domestic economy and the hope of support from Beijing limited losses in Hong Kong stocks (.HSI), to about 1.5% and in Shanghai (.SSEC), to around 0.5%.
The key focus over the next few days should be on whether the dollar continues to sink and how Europe and China might respond, said Deutsche Bank strategist George Saravelos.
"Given the dramatic nature of the moves, we are becoming increasingly concerned that the dollar is at risk of a broader confidence crisis," he warned.