The International Monetary Fund (IMF) has warned that Donald Trump’s implementation of swingeing tariffs poses a “significant risk” to the global economy, as stock markets were hit by a punishing worldwide sell-off by investors.
Kristalina Georgieva, the managing director of the IMF, said it was important that the US and its trading partners avoided further escalating Trump’s trade war, while stock markets plunged on Friday as China retaliated against the tariffs.
“We are still assessing the macroeconomic implications of the announced tariff measures, but they clearly represent a significant risk to the global outlook at a time of sluggish growth,” Georgieva said.
“It is important to avoid steps that could further harm the world economy. We appeal to the United States and its trading partners to work constructively to resolve trade tensions and reduce uncertainty.”
China retaliated on Friday, accusing the US of “bullying” and signalling a new front in the intensifying global trade war.
The Chinese finance ministry said it would impose additional tariffs of 34% on all US goods from 10 April as a countermeasure to sweeping border taxes announced by the US president on Wednesday.
Trump’s “liberation day” tariffs of up to 50% on imports to the US had already wiped trillions of dollars off the value of the world’s biggest companies on Thursday amid heightened fears of a US recession.
The sell-off continued into Friday, with Asian and European markets falling. In London, the FTSE 100 index of the UK’s biggest stocks fell 313 points, or 3.7%, putting it on track for its biggest one-day decline in more than two years.
“This practice of the US is not in line with international trade rules, seriously undermines China’s legitimate rights and interests, and is a typical unilateral bullying practice,” said China’s state council tariff commission.
Japan’s Nikkei index fell almost 3% on Friday, ending the week down 9%, while Tokyo’s Topix was down 4.5%. South Korea’s Kospi closed down 1.3%.
Elsewhere in Europe, the French Cac 40 index and the German Dax both fell 3.7%.
Brent crude, the international benchmark for oil, fell by 3.8% on Friday, down to $67.48 a barrel. That is the lowest level since early December 2021.
Futures prices indicate that the S&P 500 and the Dow Jones will drop by 0.7% when trading resumes in New York, while the Nasdaq is expected to open down 0.5%.
Derren Nathan, the head of equity research at Hargreaves Lansdown, said: “Despite months of sabre-rattling by Donald Trump, markets appear to have been unprepared for the depth and breadth of tariffs announced by the White House.
after newsletter promotion
“The tech-heavy Nasdaq saw the worst of it, falling nearly 6%, but there were hefty drops among the banks, industrials and energy sectors. Traditional defensive havens offered some refuge, with gains seen in consumer staples and utilities.”
Shares in Indian pharmaceutical companies also slumped after Trump said that US tariffs on drugmakers were still under consideration. The NSE Nifty Pharma index fell more than 6% on Friday.
Pharmaceutical companies had experienced a boost on Thursday as the sector was believed to have been exempted from the US import duties.
In the UK, a Treasury minister said the government was “negotiating intensively” and “at pace” to secure a deal with the US. The government is also consulting on possible retaliatory action.
The exchequer secretary to the Treasury, James Murray, told Sky News: “The next stage of engagement is to ask [for companies’] input about what possible measures would look like in terms of the UK response because we want to involve businesses in that decision, and we need to be clear that we keep all options on the table … We reserve the right to retaliate but we want a deal, and our full focus is on that.”
Bond prices have jumped across Europe and the US amid fears over global economic growth.
UK government bonds – seen as a safe haven asset – increased in value, sending the yield, or effective interest rate, plummeting. The two-year UK government bond yield fell to its lowest level since last September, 0.29 percentage points lower than when US tariffs were announced. The 10-year gilt was 0.1% lower, taking it to the lowest level since February.
The falls will ease the pressure on the UK chancellor, Rachel Reeves, who announced cuts to welfare spending in the spring statement largely to cover an increase in borrowing costs earlier this year.
Traders also ramped up their bets on cuts to UK interest rates. The money markets now expect about 74 basis points of cuts by the Bank of England this year. That shows that three more quarter-point rate cuts are almost fully priced in.
A cut, from the current level of 4.5%, at the Bank’s next rate-setting meeting in early May is now an 86% chance, up from about 75% on Thursday.
