US stock market falls have deepened as concerns grow that President Donald Trump’s tariffs on Canada, Mexico and China will “disrupt global trade”.
President Trump has followed through on a threat to impose 25% tariffs on imports into the US from Canada and Mexico, and a 20% levy against goods arriving from China.
Canada’s PM Justin Trudeau told Donald Trump that “this is a very dumb thing to do”.
Leading stock indexes in the US were trading sharply lower on March 4, marking a second day of declines, while markets in the UK, Germany and France all closed down.
Canada and China have already announced retaliatory import taxes on US goods following Trump’s tariffs coming into force.
Mexico’s President Claudia Sheinbaum said the country would announce a response on Sunday that would include “tariff and non-tariff measures”.
Olof Gill, trade spokesperson for the European Union (EU), said: “These tariffs threaten deeply integrated supply chains, investment flows and economic stability across the Atlantic.”
Donald Trump has also threatened to impose 25% tariffs on the EU, recently claiming that the bloc was “formed to screw the United States”. Europe has pledged to hit back, but no tariffs have been implemented yet.
After the US confirmed on March 3 that the tariffs against its neighbouring nations and China would go ahead, the country’s three main stock indexes dropped.
Sharp falls continued on March 4 while in London, the FTSE 100 index of the UK’s biggest publicly-listed companies plunged, ending the day down 1.2%.
Donald Trump is hoping that imposing tariffs on the goods that the US buys will force foreign companies to invest in America, boost tax revenues and grow the economy.
He has argued the tariffs, which are a tax paid by the business importing the product, will boost US manufacturing and protect jobs as foreign companies switch to productionin America.
But tariffs also tend to trigger retaliation from targeted countries, disadvantaging domestic businesses looking to export goods, meaning the measures can ultimately hold back trade.
Analysts have warned that tariffs could lead to economic recessions in Mexico and Canada,push up prices for US households and could also have a knock-on effect on consumers across the world, including in the UK.
A number of US retailers have already warned that prices will rise. Target’s boss Brian Cornell warned consumers were likely to see increases over the next couple of days for foods such as avocados, bananas and strawberries.
Mexican avocados make up nearly 90% of the US market each year.
Meanwhile, a BestBuy executive warned that prices could soon head higher.
Ford chief executive Jim Farley warned last month the business “could handle two weeks of tariffs”.