Global stock markets tumble to begin week as Trump remains committed to tariffs

Global stock markets extended a severe plunge Monday, fuelled by fears that U.S. tariffs would lead to a global economic slowdown. European and Asian shares saw dramatic losses, the leading U.S. index flirted with bear market territory in pre-market trading, and oil prices sagged. 

The massive sell-off in riskier assets at the start of the trading week follows President Donald Trump’s announcement of sharply higher U.S. import taxes and retaliation from China that saw markets fall sharply Thursday and Friday. 

Late Sunday, Trump reiterated his resolve, saying, “sometimes you have to take medicine to fix something.” 

WATCH l Trump defiant despite the market reaction:

‘Your question is so stupid’: Trump defends tariffs despite market collapse

U.S. President Donald Trump again defended his tariffs despite continued global market chaos. On Air Force One, Trump snapped at a reporter, saying, ‘your question is so stupid. I don’t want anything to go down, but sometimes you have to take medicine to fix something.’

U.S. futures signalled further weakness ahead. For the S&P 500, they lost 3.4 per cent, while for the Dow Jones Industrial Average, they shed 3.1 per cent. Futures for the Nasdaq lost 5.3 per cent. 

Some countries, South Korea and Pakistan among them, said they were sending trade officials to Washington soon to try to seek clarity.

However, Germany’s economy minister, Robert Habeck, was defiant as he arrived at a meeting of European Union trade ministers in Luxembourg, saying the premise of the wide-ranging tariffs was “nonsense” and that attempts by individual countries to win exemptions haven’t worked in the past. 

It’s important for the EU to stick together, he said. That “means being clear that we are in a strong position — America is in a position of weakness.”

Trump has justified the tariffs as a matter of addressing American trade deficits — which most economists say is not a sign of economic health in and of itself. In the case of Canada and Mexico, he has sought to use tariffs to try to curb the flow of fentanyl into the U.S., even though drug interdictions from Canada into the U.S. are relatively low.

JPMorgan Chase CEO Jamie Dimon, in his much-read annual note to shareholders early Monday, cautioned investors that the turmoil caused by U.S. tariffs and a global trade war could slow growth in the world’s largest economy, spur inflation and potentially lead to lasting negative consequences.

“The quicker this issue is resolved, the better because some of the negative effects increase cumulatively over time and would be hard to reverse,” the CEO wrote.

JPMorgan’s economists raised the risk of a U.S. and global recession this year to 60 per cent from 40 per cent after Trump unveiled the steepest trade barriers in more than 100 years last week.

Dimon in January said critics of Trump’s tariffs needed to “get over it,” though he did allow at the time they would have to be implemented carefully.

Flirting with bear territory

If the pre-market futures losses materialize when the U.S. market opens, the S&P 500 will enter bear market territory — defined as a fall of more than 20 per cent from the peak. The index was off 17.4 per cent as of the end of last week. 

The U.S. Federal Reserve could cushion the blow of tariffs on the American economy by cutting interest rates, which Trump in a social media post early Monday argued for. That can encourage companies and households to borrow and spend. But Fed chair Jerome Powell said Friday that the higher tariffs could drive up expectations for inflation and lower rates could fuel still more price increases. 

On Friday, the worst market crisis since the COVID-19 pandemic shifted into a higher gear as the S&P 500 plummeted six per cent and the Dow plunged 5.5 per cent. The Nasdaq composite dropped 3.8 per cent. 

“There’s no sign yet that markets are finding a bottom and beginning to stabilize,” wrote Deutsche Bank analysts in a research note.

Chinese markets often don’t follow global trends, but they also tumbled. Hong Kong’s Hang Seng dropped 13.2 per cent, while the Shanghai Composite index lost 7.3 per cent. In Taiwan, the Taiex plummeted 9.7 per cent, while South Korea’s Kospi lost 5.6 per cent.

On Monday, Beijing struck a note of confidence even as markets in Hong Kong and Shanghai tumbled. The People’s Daily, the Communist Party’s official mouthpiece, had strong words. 

“The sky won’t fall,” it declared, even if the U.S. tariffs have an impact. “Faced with the indiscriminate punches of U.S. taxes, we know what we are doing and we have tools at our disposal,” it added.

Oil prices plummet

Middle East stock markets tumbled Monday as they struggled with the dual hit of the United States’ new tariff policy and a sharp decline in oil prices.

Benchmark Brent crude is down by nearly 15 per cent over the last five days of trading, with a barrel of oil costing just over $63 US. That’s down nearly 30 per cent from a year ago.

That cost per barrel is far lower than the estimated break-even price for Saudi Arabia and most other countries producing energy in the Middle East. That’s coupled with the new tariffs, which saw the Gulf Cooperation Council states of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates hit with 10 per cent tariffs. 

“With these measures and the expected retaliatory measures that could be adopted by other countries, the stability and predictability of international trade could be undermined,” the accounting firm PwC said in an advisory to its Mideast clients.

Tokyo’s Nikkei 225 index closed down 7.8 per cent. European shares followed Asian markets lower, led by Germany’s DAX index, which briefly fell more than 10 per cent at the open on the Frankfurt exchange, but recovered some ground to move down 5.8 per cent in morning trading.