04 February 2025 , 09:17
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Markets recover some losses after Trump agreed to delay new duties on Mexico goods, sparking hopes of a reprieve.
Global stock markets came under pressure after Donald Trump signed off on new US tariffs on China, Canada and Mexico, prompting fears of a trade war.
Markets recovered some of their losses early on Monday after it emerged that the US president had agreed to delay new duties on goods from Mexico for a month, sparking hopes of a reprieve.
Trump rattled investors by vowing to proceed with the tariffs over the weekend, triggering what was quickly described as a “Trump tariff tantrum” in the markets on Monday.
Wall Street opened sharply lower, with the S&P 500 falling by almost 2%, before recovering after Mexico and the US announced a month-long pause on duties to allow for negotiations. The S&P 500 finished down 0.8% and the tech-focused Nasdaq was down 1.2%.
The Dow Jones industrial average briefly broke out of the red to trade marginally higher, before closing down 0.3%.
Earlier in the day in London, the FTSE 100 share index shed 1.4% from last Friday’s record high, before clawing back some of its losses to trade down 1%.
Germany’s DAX index fell by 1.5%, while France’s CAC 40 was down by 1.2%. Spain’s IBEX dropped 1.2% and Italy’s FTSE MIB lost 0.7%.
Nvidia, the US tech company that suffered a record plunge in its price last week after the emergence of Chinese AI firm DeepSeek, was the biggest faller on the Dow, down more than 5%.
Shares in some of the biggest European carmakers slumped. Volkswagen, BMW, Porsche, Volvo Cars, Stellantis and the commercial vehicle maker Daimler Truck fell between about 5% and 6%. The French car parts supplier Valeo slumped by 8%.
Trump announced 25% tariffs on Mexico and Canada, and a 10% tariffs on Chinese goods.
In London, shares fell in companies across several industries. Shares in Scottish Mortgage Investment Trust, which has investments in US tech companies, the retailer JD Sports Fashion and the miner Antofagasta fell more than 4%.
The pound edged lower against a strengthened US dollar, down 0.6% at $1.23, but rose 0.5% to €1.20 as the euro came under pressure.
The Canadian dollar hit a 20-year low against the US dollar before recovering some losses. Doug Ford, the premier of Ontario, Canada’s most populous province, said he would ban US companies from provincial contracts until the tariffs are removed.
He added: “US-based businesses will now lose out on tens of billions of dollars in new revenues. They only have President Trump to blame.
“We’re going one step further. We’ll be ripping up the province’s contract with [Elon Musk’s] Starlink. Ontario won’t do business with people hellbent on destroying our economy.”
Asian markets were the first to open since the weekend’s tariff announcements, with Japan’s Nikkei slumping 2.8% and the Hang Seng in Hong Kong 1% lower, although mainland Chinese markets remain shut for the lunar new year holiday until Wednesday.
The sell-off also engulfed cryptocurrencies, which have rallied since Trump’s election in November. Bitcoin, the world’s biggest cryptocurrency, hit a three-week low of $91,441.89 overnight and stood at $95,730.35, down 6.2%.
One of Wall Street’s biggest banks, JPMorgan, expressed concern that the Trump administration was making conditions harder for businesses.
The JP Morgan Chase chief economist, Bruce Kasman, said: “This weekend’s actions challenge our underlying view that the Trump administration will strive to limit disruptive policies as it balances its desire to reduce engagement with the world with a commitment to support US businesses.
“In short, the risk is that the policy mix is tilting (perhaps unintentionally) into a business-unfriendly stance.”
Richard Hunter, the head of markets at the online investment platform Interactive Investor, said: “February seems likely to begin with a Trump tariff tantrum.”
Naeem Aslam, the chief investment officer at Zaye Capital Markets, said investors were bracing for heightened uncertainty in global trade and economic stability: “These downturns are driven by investor anxiety about the broader impact of tariffs on the global economy, particularly as European economies are highly intertwined with US trade policies.”
Kathleen Brooks, the research director at XTB, said: “This does not mean that the UK economy will avoid impact from the tariffs, but it does mean that the UK economy could be more resilient than elsewhere.”
She added: “It’s too early to know exactly what impact tariffs will have on the global economy, but it is fair to say that they have a high potential of triggering inflation, and weighing heavily on global growth, including the US economy.”