The FTSE 100 and S&P 500 are both set to open dramatically lower after US president Donald Trump revealed severe tariffs on American trading partners yesterday evening.
The FTSE 100 is set to open down 1.6 per cent after the UK was hit by a sweeping 10 per cent tariff on exports to the US from next week, along with Trump’s 25 per cent tariff on automobiles for all countries.
The move came as a blow to the UK stock market and wider economy. Current exports total £60bn worth of goods to the US each year, including £7.6bn worth of cars last year.
European stock markets could be hit even harder. The German DAX is set to open down two per cent, after the European Union was slapped with a 20 per cent tariff.
The crash has been managed by reports that the EU is preparing a package of emergency measures to support sectors that will be hit hardest by the US tariffs.
However, initial indications suggest US markets could be hit hardest. The S&P 500 and Nasdaq are down more than three per cent in futures trading, while government bonds yields have sunk to their lowest since the start of the year.
“The tariffs put in place last night were extraordinary both in terms of scale and in how they were calculated,” said Deutsche Bank analyst Jim Reid.
The tariffs are expected to significantly affect US growth prospects, cutting into GDP by at least 1.5 per cent while hiking inflation by a similar amount, according to Deutsche Bank.
Reid explained that while the level for Western countries had been broadly expected, Asian countries had been hit much more severely, with countries such as Vietnam being hit with a 46 per cent tariff.
Mark Haefele, chief investment officer at UBS Global Wealth Management, said: “Even if tariffs are ultimately reduced by year-end, the near-term shock and associated uncertainty is likely to drive a near-term slowdown in the US economy and reduce full-year 2025 growth to closer to or below one per cent. We would also expect the Federal Reserve to deliver 75-100bps of rate cuts over the remainder of 2025.”
Japan, which has suffered a 24 per cent tariff, saw its stock market sink upon open this morning, with the Nikkei slumping more than four per cent to an eight-month low.
Despite the significant fall in markets following the announcement, stock prices has actually been performing strongly in the run-up the announcement, after Treasury Secretary Scott Bessent’s said to lawmakers that the tariffs were a “cap” that could be negotiated downwards.
“The market was too optimistic,” Reid added.