Stock markets fall after US tariffs spark trade war fears

Stock market falls across the US, Europe and the UK deepened as concerns grow that President Donald Trump’s tariffs on Canada, Mexico and China will “disrupt global trade”.

Trump has followed through on a threat to impose 25% tariffs on imports into the US from Canada and Mexico, and a 20% levy against goods arriving from China.

Leading stock indexes in the US opened sharply lower on Tuesday, marking a second day of declines, while markets in the UK, Germany and France also tumbled.

Olof Gill, trade spokesperson for the European Union (EU), said: “These tariffs threaten deeply integrated supply chains, investment flows and economic stability across the Atlantic.”

Canada and China have already announced retaliatory import taxes on US goods following the Trump’s tariffs coming into force. Mexico’s President Claudia Sheinbaum said the country would announce a response on Sunday which would include “tariff and non-tariff measures”.

Trump has also threatened to impose 25% tariffs on the EU, recently claiming that the bloc was “formed to screw the United States”. Europe has pledged to hit back, but no tariffs have been implemented yet.

After the US confirmed on Monday that the tariffs against its neighbouring nations and China would go ahead, the country’s three main stock indexes dropped.

Sharp falls continued on Tuesday while in London FTSE 100 index of the UK’s biggest publicly-listed companies plunged.

Chancellor Rachel Reeves said she did not want to see tariffs increase.

“I don’t think it serves anyone well,” she said. “And it’s absolutely the case that even if tariffs aren’t applied to the UK, we will be affected by slowing global trade, by a slower [economic] growth and by higher inflation than otherwise would be the case.”

Trump is hoping that imposing tariffs on the goods that the US buys will force foreign companies to invest in America, boost tax revenues and grow the economy.

He has argued the tariffs, which are a tax is paid by the business importing the product, will boost US manufacturing and protect jobs as foreign companies switch to production in America.