Global markets slide as Trump defends tariffs as economic remedy

Monday 07 April 2025 - 08:00

By: Zahouani Ilham

Global markets slide as Trump defends tariffs as economic remedy

Global financial markets have plunged as US President Donald Trump intensified his defense of broad new tariffs, describing them as necessary "medicine" despite triggering widespread investor panic and massive sell-offs.

Speaking aboard Air Force One, Trump said although he doesn’t wish for economic losses, temporary pain is sometimes required to correct systemic issues. He blamed previous administrations for enabling foreign nations to exploit the US through unfair trade practices, saying these countries had taken American jobs, money, and businesses.

Trump reaffirmed his commitment to implementing “reciprocal tariffs” and insisted he won’t ease up until the US achieves more balanced trade relationships. According to him, many foreign leaders have already shown interest in negotiating new trade deals. “We’re not going to run deficits anymore,” he stated, aiming instead for trade surpluses or, at minimum, balanced exchanges.

Markets around the world reacted sharply to the escalating trade tensions. On Monday, major indices in Asia dropped significantly—Taiwan and Hong Kong each fell by around 10%, Japan’s Nikkei 225 dropped nearly 9%, while Singapore and South Korea recorded losses exceeding 5%. Australia’s ASX 200 also declined about 6%.

Wall Street is expected to continue its downward spiral, following a previous two-day decline that erased more than $6 trillion in market capitalization. Futures linked to the S&P 500 fell by 2.7%, and Nasdaq-100 futures dropped by 3.55%.

The US began enforcing a 10% tariff on imports, with further tariffs ranging from 11% to 50% scheduled for Wednesday. The measures are set to affect both rivals and allies, with China facing a 34% tariff and the EU, Japan, and South Korea anticipating hikes of 20% to 25%.

China responded last week with a series of countermeasures, including its own 34% tariff on US imports and restrictions on exporting key minerals. The European Union is also preparing a list of retaliatory tariffs.

Trump said on Sunday he is open to negotiating with China but stressed that any agreement must involve eliminating Beijing’s large trade surplus with the US. The Beijing Stock Exchange 50 Index plummeted over 20% as tensions rose.

China's Vice Commerce Minister Ling Ji said the new tariffs, effective April 10, aim to steer the US back toward multilateral trade norms, and he reassured foreign investors that China remains attractive for global business.

While several US trade partners—such as the UK, Australia, Indonesia, and Taiwan—are currently refraining from retaliatory actions, Israeli Prime Minister Benjamin Netanyahu is scheduled to be the first world leader to personally address the issue with Trump during his upcoming visit to Washington.

As market uncertainty grows, analysts are warning of a rising risk of a US recession. JPMorgan raised its recession forecast to 60%, while S&P Global estimates the risk between 30% and 35%. Economists warn that the disruptive nature of current US trade policies could destabilize both American and global economic growth.

Former Treasury Secretary Lawrence Summers described the new trade stance as potentially the most harmful economic decision the US has made since World War II. He criticized the administration for doubling down on a flawed strategy.

Despite mounting concern, Trump officials maintain that a recession isn’t inevitable. Treasury Secretary Scott Bessent emphasized that the administration is focused on long-term economic health, arguing that previous leadership had steered the country toward financial disaster.