Trump’s tariffs spur global trade war as U.S. Stocks plunge

Apr 04, 2025 News

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WASHINGTON/OTTAWA, April 3 (Reuters) – U.S. trading partners threatened to ratchet up a trade war with the United States on Thursday as President Donald Trump’s sweeping tariffs ignited fears of steep price hikes in the world’s largest consumer market.

The penalties announced on Wednesday spurred a plunge in world markets and drew condemnation from other leaders reckoning with the end of a decades-long era of trade liberalization.

Trump’s tariffs would amount to the highest trade barriers in more than a century: a 10% baseline tariff on all imports and higher targeted duties on some of the country’s biggest trading partners.

That could jack up the price of everything from cannabis to running shoes to Apple’s iPhone for U.S. shoppers.

The Associated Press reported that U.S. companies had trillions of dollars in value wiped out Thursday because of the sweeping tariffs on foreign imports.

Virtually every sector suffered big losses as U.S. financial markets closed with their biggest one-day drop since COVID-19 flattened the global economy five years ago.

Banks, retailers, clothing, airlines and technology companies were among the hardest hit, with consumers expected to cut spending if tariffs lead to higher prices for goods and services.

Many economists called the tariffs much worse than expected, and investors dumped shares in companies they predict will suffer most from what is effectively a business tax.

In many cases that tax will be passed on to consumers. If consumers pull back their spending because of higher prices, businesses will produce fewer goods and economic growth could stall or contract. Consumer spending makes up about 70% of economic activity in the U.S.

“This is a game changer, not only for the U.S. economy but for the global economy,” Olu Sonola, Fitch Ratings’ head of U.S. Economic Research, said in a report. “Many countries will likely end up in a recession.”

According to Reuters, businesses raced to adjust. Automaker Stellantis said it would temporarily lay off U.S. workers and close plants in Canada and Mexico, while General Motors said it would increase U.S. production.

Canadian Prime Minister Mark Carney said the United States had abandoned its historic role as a champion of international economic cooperation.

“The global economy is fundamentally different today than it was yesterday,” he said as he announced a limited set of countermeasures.

Elsewhere, China vowed retaliation for Trump’s 54% tariffs on imports from the world’s No. 2 economy, as did the European Union, which faces a 20% duty.

French President Emmanuel Macron called for European countries to suspend investment in the United States.

Other trading partners, including South Korea, Mexico and India, said they would hold off for now as they seek concessions.

Washington’s allies and rivals alike warned of a devastating blow to global trade. The burden could fall heaviest on poor countries like Madagascar, which would face a 47% tariff on vanilla exports.

“The consequences will be dire for millions of people around the globe,” EU chief Ursula von der Leyen said.

Stocks suffered a global meltdown, as analysts warned the tariffs could upend global supply chains and hurt corporate profits. Tech and retail stocks were especially hard-hit.

Imports to the United States now face an average duty of 22.5%, up from 2.5% last year, according to Fitch Ratings.

Trump says the “reciprocal” tariffs are a response to barriers put on U.S. goods, though his list of targets includes uninhabited Antarctic islands and some of the world’s poorest countries, which now face tariffs approaching 50%.

Administration officials said the tariffs would create manufacturing jobs at home and open up export markets abroad, though they cautioned it would take time to see results.

“We know a lot of Americans are worried,” Vice President JD Vance told Fox News. “What I’d ask folks to appreciate here is that we are not going to fix things overnight.”

Economists say the tariffs could reignite inflation, raise the risk of a U.S. recession and boost costs for the average U.S. family by thousands of dollars – a potential liability for a president who campaigned on a promise to bring down the cost of living. Regions that backed Trump in the last election could be among the most exposed, according to the Federal Reserve.

Trump predicted financial markets would recover.

“The markets are going to boom, the stock is going to boom, the country is going to boom, and the rest of the world wants to see is there any way they can make a deal,” he told reporters before departing Washington for a golf tournament at one of his Florida resorts.

This map shows the percentage of reciprocal tariffs imposed by the U.S. administration on each economy.

This map shows the percentage of reciprocal tariffs imposed by the U.S. administration on each economy.

FREEZING BUSINESSES, SCRAMBLING THE GLOBAL ORDER

Since returning to the White House in January, Trump’s on-again, off-again tariff threats have rattled consumer and business confidence. Trump could step back again, as the reciprocal tariffs are not due to take effect until April 9.

U.S. Commerce Secretary Howard Lutnick said that would not happen. “The president is not going to back off what he announced yesterday,” he said on CNN.

But analysts said the uncertainty will only snowball, making it difficult for businesses to forecast demand.

Others questioned whether the tariffs would goose U.S. exports to poor countries like Madagascar, where the market for high-end U.S. products is limited. “Presumably no one is buying Teslas there,” said John Denton, head of the International Chamber of Commerce.

Many of those countries are already struggling with a loss of U.S. funding to fight HIV, malaria and other diseases.

Analysts said the tariffs could also alienate allies in Asia and undercut strategic efforts to contain China.

Trump has slapped a 24% tariff on Japan and a 25% tariff on South Korea, both home to major U.S. military bases. He also hit Taiwan with a 32% tariff as the island faces increased military pressure from China.

In Europe, Trump has already upset NATO allies with demands for higher defense spending and potential concessions to Russia in its war in Ukraine.

Germany’s economy minister Robert Habeck said the region should look to bolster economic ties with other countries, and Canada’s Carney said he had spoken to German Chancellor Olaf Scholz about strengthening trade.

Canada and Mexico, the largest U.S. trading partners, were not hit with targeted tariffs on Wednesday, but they already face 25% tariffs on many goods and now face a separate set of tariffs on auto imports.

(Trump’s tariffs spur global trade war as U.S. Stocks plunge)

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