Wall Street braced for heavy losses as dollar slumps on Trump tariffs

Global stocks fell and government bonds rallied on Thursday after Donald Trump’s sweeping new tariffs left the world on the brink of a full-blown trade war.

The benchmark Stoxx Europe 600 index was down 1.8 per cent by late morning, after a steeper fall at the open, as investors flocked to haven assets including Treasuries and German Bunds. Futures tracking the S&P 500 and the Nasdaq were down 3.4 per cent and 3.8 per cent, respectively.

The dollar was down 2.1 per cent against a basket of its peers as investors fretted about the impact on the US economy and priced for more Federal Reserve rate cuts.

Trump’s aggressive trade policy, which he has put at the heart of this second term in the White House, had already hit stocks in the first quarter, but investors said the new set of tariffs announced on Wednesday were steeper than feared.

“It’s worse than expected, there’s no sugar coating it,” said Zhikai Chen, head of global emerging market equities at BNP Paribas Asset Management.

Trump said a levy of 10 per cent would apply to nearly all US imports from April 5, and that dozens of countries, including China, would be subject to further “reciprocal” tariffs from April 9.

In a sign of investors’ concern over the potential damage to the US economy from tariffs, traders began betting on the chance of a fourth quarter-point interest rate cut this year from the Federal Reserve, according to levels implied by swaps markets. Until Wednesday, investors had priced in three cuts.