Markets greet Trump’s tariffs with a blizzard of red numbers

Stocks, the dollar, and crude oil are all down on fears of a trade war-induced slowdown

REUTERS/Brendan McDermid

A trader works on the floor at the New York Stock Exchange (NYSE) in New York City, US, on April 3, 2025.

Markets greet Trump’s tariffs with a blizzard of red numbers

Keith Johnson

last update on 04 Apr 2025

By nearly every metric—US and global stock and bond markets, the value of the dollar, or the price of oil—investors seem to expect the impact of Trump’s new tariffs to be a drag on growth, a boost to inflation, and especially bad news on both fronts for the United States.

Trump’s decision to levy the biggest tariffs in more than a century on all US trading partners has especially unsettled US stock markets, which were formerly a bellwether for Trump. The blue-chip Dow Jones Industrial Average opened with a loss of 1,500 points, or 3.6%. The broader S&P 500 and the tech-focused Nasdaq indices also were darkly red, with early declines of about 4% and 5%, respectively.

European markets fared only a little better (Europe was hit with a blanket tariff of 20% on all its exports to the United States), with steep declines in the German, French, and Swedish bourses. Asian markets, the first to open in the wake of Trump’s Wednesday announcement, also finished in the red, with particular losses in US trade partners and allies such as Japan and South Korea.

Bond markets also reflected concerns about the Trump plan. Yields on benchmark US debt fell to the lowest level in six months, a sign that investors are seeking any sort of safe haven. They are even flocking back to Europe’s gold standard, the German 10-year bond, which had been beaten up in recent weeks after the new German government announced a massively expansive fiscal package.

But the idea of a safe haven does not, oddly enough, extend to the US dollar, which is down across a basket of global currencies, with especially sharp falls against major currencies including the euro, the yen, the British pound, and the Swiss franc. Normally, higher tariffs should serve to prop up the greenback, not abet its downfall (even if that is what Trump has sought all along).

The Dow Jones opened 1,500 points down. The S&P 500 and the tech-focused Nasdaq indices were also darkly red.

The Chinese yuan, or renminbi, is only down slightly against the dollar but is something to keep an eye on: Beijing could let its currency slide further to take some of the sting out of new US tariffs that cumulatively add up to at least 54% on the world's biggest exporter.

The sliding dollar, even against what should be tariff tailwinds, is an indication that investors fear a weak US economy as soon as Trump's new tariffs start to bite. Indeed, JP Morgan, the investment bank, said that it now estimates a recession is likely. The Budget Lab at Yale figures the double-whammy of existing tariffs and those announced this week could knock almost a full percentage point off of US GDP growth this year.

An even sharper demonstration of the fears of a global showdown are found in the price of crude oil, with benchmark grades in New York and London down about 7% on the day—at a time of shooting wars in the Middle East, including a stepped-up US military campaign in one of the world's critical energy corridors. Only part of that can be chalked up to a slightly accelerated increase in OPEC crude output.

Trump's new tariffs raise the average rate of US import duties to levels last seen more than a century ago, just about the time period he identified in his Wednesday Rose Garden speech as America's true golden age. In addition to the growth impacts, Yale's Budget Lab expects the tariffs to raise prices by a few percentage points this year, or in other words, a bill of about $3,800 for each household.

Most of the market reaction on Thursday to Trump's decision to abandon a decades-old US embrace of free trade can be chalked up to its potentially harmful consequences on growth, employment, and prices. (Congress is seeking to reassert some of its long-delegated trade authority, with a bipartisan bill introduced Thursday in the Senate to give Congress a vote on new tariffs.)

Asian markets finished in the red, with losses in US trade partners and allies such as Japan and South Korea

But some of it may well reflect confusion or dismay at the way the Trump trade team determined tariff rates. After teasing so-called reciprocal tariffs that would partially address legitimate trade grievances, the administration instead produced what analysts described as arbitrary numbers that bear little or no relation to other countries' actual tariff rates or trade policies. Trump's Office of the United States Trade Representative (USTR) explained how it came up with those so-called reciprocal tariffs, which produced oddities such as 47% on Madagascar or 49% on Cambodia.

The problem is that the methodology released by the USTR doesn't appear to calculate any of the target countries' actual trade or tariff policies. Instead, it simply seeks to figure out what level of tariffs would eliminate all trade deficits with every country, then cut those numbers in half.

The list of countries Trump and his team targeted with tariffs included other oddities. Alongside the actual big US trading partners, including China and the European Union, are a host of overseas territories belonging to Britain, France, and Australia—usually targeted with different rates than their home countries.

The Falkland Islands, a British overseas territory, gets hit with a 41% tariff, while Norfolk Island, an appendage of Australia, faces a tariff rate three times higher than its home country. Perhaps the most bizarre: a 10% US tariff that will target the Heard and McDonald Islands near Antarctica, an uninhabited Australian outpost mostly crowded with penguins.

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