'Trump's tariff tantrum' wipes more than £500billion off stock markets and sparks rate fears

Concerns astir a full-blown planetary commercialized warfare has sent shockwaves done fiscal markets, amid fears implicit what it could mean for inflation, involvement rates and the satellite economy

More than £500billion was wiped disconnected planetary banal markets arsenic US President Donald Trump’s tariffs sparked fears of a planetary commercialized war.

Financial markets were sent into a caller tailspin arsenic investors were spooked by the menace of higher inflation. President Trump signed enforcement orders to impose 25% tariffs connected Mexican and astir Canadian goods, and a further 10% connected goods from China.

By precocious morning, the UK’s FTSE was down astir 100 points, oregon conscionable implicit 1.1%. Its losses were little than those successful helium eurozone, however, aft President Trump’s pledge to “definitely” enforce tariffs connected the EU. By lunchtime, the FTSE All World Index - a measurement of banal markets globally - was down astir 0.8%, the equivalent of much than £500billion.

As good arsenic stock prices, the imaginable of a full-blow commercialized warfare besides unsettled currency markets. Sterling is connected way for its strongest gains against the euro successful 4 years. A stronger lb is bully quality for Brits heading to Europe connected vacation arsenic they volition get much for their wealth erstwhile exchanging cash.

Experts says sterling’s rally is due to the fact that Donald Trump’s medication has “left the UK disconnected the tariff hook” - for present astatine least. Drinks elephantine Diageo, which makes Guinness and Johnnie Walker whisky, was among the large fallers connected the FTSE 100, with a much than 3% slump successful its stock terms wiping £1.6billion disconnected the firm’s banal marketplace value.

It comes amid concerns that tariffs volition beryllium slapped connected spirits and different products it sells. More than 40% of what Diageo sells to the US comes implicit the borderline from Mexico and Canada. Investment slope Jefferies estimates the institution volition person to hike its prices by 4.6% arsenic a result, with a deed to profits.

Richard Hunter, caput of markets astatine interactive investor, said: “Investors ended the period nervously, and their concerns were vindicated pursuing the weekend’s events. February seems apt to statesman with a Trump tariff tantrum.”

He added: “Markets famously dislike uncertainty, and the information that the UK could beryllium wrong the President’s tariff sights was capable to nonstop the main indices sharply little astatine the open. The FTSE100, which had been thing of a haven destination fixed technology volatility elsewhere, succumbed to the anticipation that adjacent its overseas net constituents would beryllium caught successful the crossfire.”

The processing situation comes arsenic the Bank of England votes this Thursday connected whether to chopped its basal complaint from the existent 4.75%. A chopped had looked precise likely, but rate-setters connected the Bank’s Monetary Policy Committee (MPC) whitethorn deliberation doubly if tariffs globally spillover into higher prices present too.

Russ Mould, concern manager astatine AJ Bell, said: “Affected countries aren’t going to instrumentality the deed lying down and a tit-for-tat script is present looking real. That could effect successful higher ostentation and enactment a halt to further involvement complaint cuts for the clip being – precisely the other of what equity investors privation to happen.”

But with tariffs risking denting an already fragile economy, the MPC whitethorn beryllium inactive emboldened to chopped rates to effort to boost growth. Hetal Mehta, caput of economical probe astatine St. James’s Place, said: “For immoderate MPC members, the lawsuit for a pre-emptive chopped whitethorn beryllium enhanced.”

Shares successful European car makers tumbled, with the centrifugal manufacture acceptable to beryllium 1 of the sectors astir affected by the planned tariffs. German elephantine Volkswagen saw its banal marketplace worth tumble £2.8billion arsenic its stock terms slumped 6.8%. Stellantis – whose brands see Chrysler, Citroen, Fiat, Jeep and Peugeot – saw its shares driblet by 6.7%, oregon £2billion. Experts pass the turmoil successful banal and currency markets could past week. Mohilt Kumar, main Europe economist astatine Jefferies, said markets had been “wrongfooted”