Markets reel as Trump's tariffs trigger global sell-off

The world is reacting increasingly violently to Donald Trump's tariffs on most trading partners. The decision announced on Wednesday raised fears of a total trade war and global recession. The extent of the sell-off is comparable only to the start of the pandemic in 2020.

The President of the United States, however, appears unfazed. In a conversation with journalists on board Air Force One, he stated that introducing tariffs is "going very well." He once again assured that he is open to "phenomenal" offers from countries that want to negotiate lowering the new rates. Despite these assurances, markets responded nervously.

So far, American companies have also significantly lost out due to tariffs. On Thursday, the value of stocks listed on one of the key stock indices, the S&P 500, decreased by over £2 trillion, marking one of the most significant single-day drops since the pandemic.

Investors were in a state of panic. Five Below (a discount store chain) and Wayfair (a supplier of furniture and home furnishings) reported declines of 29% on Thursday. Giants like Ralph Lauren, Dockers (a brand owned by Levi Strauss), and Dell lost 17%. Nike fell by 12%, and Apple by 8%.

The onset of the new trade war triggered a global chain reaction. Overnight, Japan's Nikkei fell by over 3%, South Korea's Kospi decreased by 1.5%, and the Australian index also plunged. Then it was Europe's turn, where nearly all indices plummeted—starting with Poland's WIG20, through Germany's DAX, France's CAC, Spain's IBEX, and Europe's Stoxx.

On Friday, this scenario repeated. The S&P 500 fell by 4.9% to over 5100 points. The Dow Jones Industrial Average fell another 1,618 points, or 4%, after dropping over 1600 points on Thursday. European stock exchanges also experienced declines.

Banks, goods, and services retailers are concerned that consumers will cut back on spending if tariffs lead to higher prices. Concerns are heightened because many economists described the tariffs introduced on Wednesday as much worse than expected. This is why airlines, most major footwear and clothing manufacturers (who produce their products outside the USA, and will therefore have to pay import duties on all products sent back to the country for sale) are among the companies reporting losses.

Large retailers, who also import vast amounts of goods from outside the USA, are suffering - on Thursday, Amazon lost 7% on the stock market, Target fell 9.5%, and Best Buy plummeted by 14.8%. Technology companies are also facing difficulties. Apple lost 8%, HP fell 13.1%, and Dell dropped 15.4%. Nvidia, a giant in artificial intelligence, lost 6.3%. Concerns about a recession also affect bank performance. Wells Fargo lost 7.5%, Bank of America fell 8.9%, and JPMorgan Chase dropped 5.7%. The declines are continuing on Friday.

Surprisingly, the automotive manufacturers were not hit as hard as most other sectors. This may be because most of the steel and aluminium used by Ford, GM, and Stellantis comes from the United States.

Hildegard Müller, president of VDA (Verband der Automobilindustrie), the German automotive industry association most exposed to the effects of tariffs on our side of the ocean, has no doubts that the US decisions are harmful.

It is already clear that the tariffs have a negative impact on the American economy. The consequences will be more severe, all sides will pay with lower growth and decreased prosperity," she comments.

The head of VDA admits that President Trump's motivation is unclear. "Both the transatlantic partnership and free trade are of enormous importance to the economies on both sides. They guarantee growth, prosperity, and job maintenance on both sides of the Atlantic," she adds.

She believes Washington should act in the opposite way to what was announced on Wednesday. "It is lowering tariffs and trade barriers, not raising them, which is the key factor driving further investments—a factor ensuring new jobs in the United States. Export success and import are complementary. These are two sides of the same economic success. The US and EU governments should cooperate to achieve this," Hildegard Müller indicates.

The association's president emphasizes that during President Trump's first term, the EU and the USA reached an agreement on a trade conflict that also emerged at that time. "It shows that solutions can be found through negotiations. And taking into account mutual interests," she emphasizes.

The EU must now act, showing unity and strength. It must signal its readiness to negotiate. The risk of a global trade conflict, which will negatively impact the global economy, is really high," she concludes.

Trump's policies have also hit billionaires. The 500 richest people in the world collectively lost £170 billion on Thursday—and that's in just one day. More than half of the people on Bloomberg's Billionaires Index saw their wealth drop, with an average decrease in value of 3.3%.

Thursday's drop was the fourth largest in the index's 13-year history and the biggest since the peak of the COVID-19 pandemic. Those most affected were those who supported Donald Trump during his second-term campaign.

Mark Zuckerberg, founder of Meta, suffered the largest dollar losses. A 9% drop in the company's stock cost its CEO £14.6 billion, or about 9% of his fortune. Meta was the winner among the Magnificent Seven, the largest technology companies listed. From the beginning of the year to mid-February, it gained over £285 billion in market value. Ultimately, however, since mid-February, the giant's stock, led by Zuckerberg, has fallen by about 28%.

Jeff Bezos, founder of Amazon, lost £13 billion of his fortune after the tech giant's shares fell by 9%. This was the most significant drop since April 2022. The company's shares are already more than 25% lower than their peak value from February.

Elon Musk, CEO of Tesla and, by some, Trump's right-hand man, has already lost £90 billion this year, including £9 billion on Thursday.

Rich people from other countries are also losing. On Thursday, the fortune of Bernard Arnault, the richest man in Europe and owner of the LVMH conglomerate, was reduced by £5 billion net after his company's shares fell in Paris.

The Middle East was the only region where individuals listed in Bloomberg's wealth index increased their fortunes.

For average Americans, this market collapse does not yet translate into price increases. However, it directly blows their retirement funds, which depend on stock market performance. The massive drop in stock prices wiped out trillions of dollars from US assets, affecting the value of the retirement savings of millions of citizens.

Analysts warn that tariffs will affect consumer wallets through higher prices in the long run. Due to high tariffs, companies will pay consumers additional costs by raising product prices. Companies that rely heavily on imports, especially inexpensive products from Asia, which may now be subject to tariffs of up to 54%, will suffer the most.