UK and EU stock markets slump as Trump’s tariffs, including 104% on China, take effect

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In case you’re just catching up with the latest upheaval in Donald Trump’s deepening global trade war, here’s a recap of today’s developments. And you can read our latest full report here.

Trump’s new wave of tariffs on dozens of economies came in force on Wednesday, including 104% levies against Chinese goods, as Washington and Beijing were locked in a high-stakes game of brinkmanship.
Rates on imports to the US from exporters like the European Union or Japan rose further at 12.01am (05.01am BST) Wednesday, after the imposition of sweeping 10% tariffs rocked the global economy since coming into force over the weekend.
China has been hardest hit by the tariffs but has shown no signs of backing down, vowing to fight a trade war “to the end” and promising countermeasures to defend its interests. China’s retaliatory tariffs of 34% on US goods are due to enter in force on Thursday.
Trump said on Tuesday his government was working on “tailored deals” with trading partners, with the White House saying it would prioritise allies like Japan and South Korea. His top trade official Jamieson Greer also told the Senate that Argentina, Vietnam and Israel were among those who had offered to reduce their tariffs.
Trump told a dinner with fellow Republicans on Tuesday night that countries were “dying” to make a deal. The US president said: “I’m telling you, these countries are calling us up kissing my ass.”

Donald Trump at the National Republican congressional committee dinner in Washington DC on Tuesday evening. Photograph: Nathan Howard/Reuters

A sell-off across Asian markets resumed on Wednesday, with Japan’s Nikkei down more than 3%, Hong Kong plunging more than 3%, South Korea’s currency hitting a 16-year low and government bonds suffering heavy losses. Australian shares lost billions of dollars of value, while Taiwain stocks fell 5.8% in afternoon trading. Trillions in equity have been wiped off global bourses in the past days.
Foreign exchange markets also witnessed ructions, with the South Korean won falling to its lowest level against the dollar since 2009 this week. China’s offshore yuan also fell to an all-time low against the US dollar, as Beijing’s central bank moved to weaken the yuan on Wednesday for what Bloomberg said was the fifth day in a row. Oil prices slumped, with the West Texas Intermediate closing below $60 for the first time since April 2021.
India’s central bank cut interest rates, citing “challenging” global conditions.
The European Union has sought to cool tensions, with bloc chief Ursula von der Leyen warning against worsening the trade conflict in a call with Chinese premier Li Qiang. She stressed stability for the world’s economy, alongside “the need to avoid further escalation”, an EU readout said.
With news agencies

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Helen Davidson

China’s government has criticised Trump’s actions as threatening and coercive, a “mistake on top of a mistake”, and reiterated pledges of countermeasures in a white paper published on Wednesday on the country’s trade relationship with the US.

“The move will not help to solve domestic economic problems in the US, but will ultimately backfire and make the US a victim of its own misdeeds,” the white paper said. It called for mutual respect, saying:

As two major countries with different development stages and economic systems, it is normal for China and the United States to have differences and frictions in economic and trade cooperation.

The success of China and the United States is an opportunity rather than a threat to each other.

But the lengthy document then launched into pages and pages of criticisms. It accused the US of abusing trade levers to suppress China, and of failing to meet obligations under numerous agreements including the phase one trade deal signed during Trump’s first term, and of “systematically escalated economic and other forms of pressure against China”. It cited long held complaints over US criticism and sanctions of China’s human rights abuses in Xinjiang and the crackdown on Hong Kong’s pro-democracy movement, and repeated accusations that the US was using fentanyl as a pretext to launch its trade war on China.

The white paper made it clear that China is unlikely to back down in this trade war, and made reference to the last known communication between Trump and China’s leader Xi Jinping.

Trade wars produce no winners, and protectionism leads up a blind alley. The economic success of both China and the US presents shared opportunities rather than mutual threats. The US side is expected to join forces with the Chinese side to pull in the same direction pointed out by the two heads of state in their phone conversation earlier this year.

The US dollar has fallen in value on Wednesday, alongside US government debt, as investors question whether the world’s biggest economy will fall into recession.

The dollar is down by 0.7% against a trade-weighted basket of currencies on Wednesday. The euro jumped by 0.75% to $1.1041. Sterling gained 0.3% against the dollar, with one pound buying $1.2812.

The Japanese yen also strengthened by 0.6% against the dollar, with a dollar buying 145.48 yen.

Lee Hardman, a senior currency analyst at MUFG, a Japanese investment bank, said:

The unfavourable price action has cast some doubt on the safe haven status of the US government bond market and the US dollar at the time when the global trade war is intensifying.

We expect foreign exchange market volatility to remain elevated in the near-term, and continue to expect the traditional safe haven currencies of the yen and Swiss franc to outperform.

Who will blink first: US President Donald Trump or China’s President Xi Jinping? Photograph: Mandel Ngangreg Baker/AFP/Getty Images

The astonishing 104% tariff imposed by Donald Trump on US imports from China is at the centre of the turmoil on global financial markets.

Trump appears to believe that China, led by Xi Jinping, will back down and offer some kind of deal. However, that may be unlikely, writes the Guardian’s senior China correspondent, Amy Hawkins:

The opening shots seem like a distant memory. Back in January, US president Donald Trump threatened to impose a tariff of 10% on Chinese imports. Less than three months later, the rate is now 104%.

China has condemned the tariffs. As well as applying its own reciprocal tariff of 34% on US imports, Beijing has been fighting a war of words.

“When challenged, we will never back down,” said China’s foreign ministry spokesperson, Lin Jian. The commerce ministry said: “China will fight to the end if the US side is bent on going down the wrong path.” Further countermeasures have been promised by Beijing.

You can read the full analysis here:

In London, only three share prices on the FTSE 100 have risen.

Among the notable fallers on Wednesday morning are pharmaceutical companies, after Donald Trump last night said that “major” tariffs on imported medicines were coming.

Anglo-Swedish AstraZeneca fell by 4.4% in early trading, while GSK, formerly known as GlaxoSmithKline, dropped by 3.3%.

“We’re going to be announcing very shortly a major tariff on pharmaceuticals,” Trump said at a dinner of the National Republican Congressional Committee.

The major stock market indices in London and across Europe slumped in the opening trades on Wednesday morning as Donald Trump’s tariffs took effect.

The FTSE 100 dropped by 2.2% in early trades on Wednesday, immediately undoing most of the gains on Tuesday.

Germany’s Dax index dropped by about 2.3%, while France’s Cac 40 fell by 2.4%. Spain’s Ibex index was down by 2% as well.

As what looks like another brutal trading session approaches on Europe’s stock markets, here is a quick round-up of the main market moves in Asia:

Japan’s Nikkei 225 index closed down by 3.93%. The broader Japanese Topix index fell by 3.4%.
Chinese stock markets rose, despite a 104% tariff on US imports from China, amid reports that Beijing would step in to support the market. The SSE Composite index in Shanghai rose 1.1%, while the Shenzhen SE Composite rose 2.2%.
Hong Kong’s Hang Seng index fell by 0.4%.
Australia’s S&P/ASX 200 benchmark index fell by 1.8%.
South Korea’s Kospi 200 index dropped by 1.8%.

Investors are sounding alarm bells over a steep sell-off in US bonds, traditionally seen as a safe haven for investors around the world, as the reaction to Donald Trump’s tariffs threatened to spread.

The cost of borrowing for the US government has risen sharply this week as investors dumped the bonds usually seen as the safest of assets during market turmoil.

The yield on the benchmark 10-year US Treasury bond rose by 0.16 percentage points on Wednesday to 4.42%, its highest since late February – and this week has seen the three biggest intraday moves since Trump was elected in November. Yields move inversely to prices, so surging yields mean falling prices as demand drops.

The yield on the 10-year US Treasury bond has soared to its highest since February, amid a sell-off in US government debt. Photograph: LSEG

The move in the 30-year bond was more dramatic. The 30-year yield briefly jumped above 5% to its highest since late 2023, according to London Stock Exchange Group data. It was last trading at 4.9157%, or 0.2 percentage points higher than Tuesday.

The US Treasury market is crucial to the functioning of the global financial system, setting the “risk-free” rate against which most other assets are measured. Yet it would be hard to see anything related to Trump’s economic policies as “risk-free” at the moment.

Henry Allen, a strategist at Deutsche Bank, said the sell-off in US government debt was “alarming” in a note to clients this morning.

US Treasury markets are also experiencing an incredibly aggressive selloff as we go to press, adding to the evidence that they’re losing their traditional haven status.

So there’s no sign yet that the market is managing to successfully find a bottom, and it feels like no asset class has been spared as investors continue to price in a growing probability of a US recession.

Some investors have suggested that the higher yields may be caused by investors scrambling to access cash by selling their safe assets. The US Federal Reserve will be watching that dynamic closely, as disordered selling of US government debt would cause turmoil across financial markets.

Jack Chambers, senior rates strategist at ANZ in Sydney, said:

This is beyond fundamentals right now. This is about liquidity.

You can read more on the importance of US Treasuries to the global economy here:

It is looking like another painful day ahead for European stock markets.

Financial markets open in about 45 minutes, at 8am BST. The main European futures markets are indicating heavy falls are expected when markets open.

Futures for London’s FTSE 100 index are down by 2.7%, Germany’s Dax index futures are down by 3.6%, and France’s Cac 40 is down 3.7%.

(And it’s Jasper Jolly in London taking over our coverage.)

In case you’re just catching up with the latest upheaval in Donald Trump’s deepening global trade war, here’s a recap of today’s developments. And you can read our latest full report here.

Trump’s new wave of tariffs on dozens of economies came in force on Wednesday, including 104% levies against Chinese goods, as Washington and Beijing were locked in a high-stakes game of brinkmanship.
Rates on imports to the US from exporters like the European Union or Japan rose further at 12.01am (05.01am BST) Wednesday, after the imposition of sweeping 10% tariffs rocked the global economy since coming into force over the weekend.
China has been hardest hit by the tariffs but has shown no signs of backing down, vowing to fight a trade war “to the end” and promising countermeasures to defend its interests. China’s retaliatory tariffs of 34% on US goods are due to enter in force on Thursday.
Trump said on Tuesday his government was working on “tailored deals” with trading partners, with the White House saying it would prioritise allies like Japan and South Korea. His top trade official Jamieson Greer also told the Senate that Argentina, Vietnam and Israel were among those who had offered to reduce their tariffs.
Trump told a dinner with fellow Republicans on Tuesday night that countries were “dying” to make a deal. The US president said: “I’m telling you, these countries are calling us up kissing my ass.”

Donald Trump at the National Republican congressional committee dinner in Washington DC on Tuesday evening. Photograph: Nathan Howard/Reuters

A sell-off across Asian markets resumed on Wednesday, with Japan’s Nikkei down more than 3%, Hong Kong plunging more than 3%, South Korea’s currency hitting a 16-year low and government bonds suffering heavy losses. Australian shares lost billions of dollars of value, while Taiwain stocks fell 5.8% in afternoon trading. Trillions in equity have been wiped off global bourses in the past days.
Foreign exchange markets also witnessed ructions, with the South Korean won falling to its lowest level against the dollar since 2009 this week. China’s offshore yuan also fell to an all-time low against the US dollar, as Beijing’s central bank moved to weaken the yuan on Wednesday for what Bloomberg said was the fifth day in a row. Oil prices slumped, with the West Texas Intermediate closing below $60 for the first time since April 2021.
India’s central bank cut interest rates, citing “challenging” global conditions.
The European Union has sought to cool tensions, with bloc chief Ursula von der Leyen warning against worsening the trade conflict in a call with Chinese premier Li Qiang. She stressed stability for the world’s economy, alongside “the need to avoid further escalation”, an EU readout said.
With news agencies

Germany is at risk of another recession as a result of trade tensions sparked by the Trump tariffs, the finance minister said.

“A possible trade conflict increases the risk of recession, there is no question about that,” Joerg Kuki told the broadcaster Deutschlandfunk on Wednesday.

Already smarting from two consecutive years of recession, a third contraction in 2025 would mark a historically long down-run for Europe’s largest economy.

Reuters quoted sources as saying German economic institutes are to revise down their forecast for 2025 to just 0.1% growth, under projections that do not factor in the latest Trump tariffs.

Cars queue around the A100 city highway bridge in Berlin, Germany. Photograph: Clemens Bilan/EPA

Amy Hawkins

The opening shots seem like a distant memory. Back in January, US president Donald Trump threatened to impose a tariff of 10% on Chinese imports. Less than three months later, the rate is now 104%.

China has condemned the tariffs. As well as applying its own reciprocal tariff of 34% on US imports, Beijing has been fighting a war of words.

“When challenged, we will never back down,” China’s foreign ministry said. The commerce ministry said: “China will fight to the end if the US side is bent on going down the wrong path.” Further countermeasures have been promised by Beijing.

The tit-for-tat measures could spark fears of a race to the bottom, with ordinary people suffering as prices rise and a fears of a global recession grow. But although China’s economy has in recent years been beset by its own challenges, when it comes to tariffs specifically, Beijing is unlikely to blink first.

For the full analysis on the high-stakes game of brinkmanship between China and the US, see here:

Asean must “act boldly” to accelerate regional economic integration as sweeping US tariffs leave much of the world caught in the middle of a devastating trade war, the bloc’s chief said on Wednesday.

The 10-member Association of Southeast Asian Nations, which count on the US as their main export market, were among those hit with Donald Trump’s steepest levies.

“To remain relevant and resilient in a world where economic chaos is fast becoming the new normal, we must act boldly, decisively, and together to reaffirm Asean’s commitment to a stable, predictable and business-friendly environment,” Asean’s secretary general, Kao Kim Hourn, told an investment conference.

Agence France-Presse reports he was speaking on the eve of a meeting of Asean economic and finance ministers as well as central bank governors in the Malaysian capital of Kuala Lumpur to discuss how to respond to the US tariffs.

‘We must act boldly, decisively’: Asean secretary general Kao Kim Hourn. Photograph: Joel Carrett/EPA

Asean governments have chosen not to the retaliate against Washington, preferring dialogue. But their export-oriented economies risk being hurt by a global trade war after China – another key market – imposed its own tariffs on the US.

Kao said:

Without urgent and collective action to accelerate intra-Asean economic integration and diversify our markets and partnerships, we risk ceding our place in a fractured and fast-evolving global economy.

India’s central bank has cut interest rates, citing “challenging” global conditions, AFP is reporting.

Amy Hawkins

Chinese social media is abuzz with the latest tariffs, as Donald Trump’s 104% duties on Chinese goods kicked in on Wednesday.

One of the top trending hashtags on Weibo was “The US begs for eggs while fighting the trade war”, while another was “Trade barriers can’t stop economic globalisation”.

Weibo users mocked the US for suffering from an egg shortage, with some accounts sharing pictures of empty egg shelves in US supermarkets.

“If you can’t even handle an egg, why are you fighting a trade war,” one user wrote.

A Los Angeles grocery store shelf nearly empty of eggs in February. Photograph: Allison Dinner/EPA

Influential Chinese bloggers have suggested that China could restrict the import of American poultry and eggs as a countermeasure in the trade war, which would be a further blow to US farmers.

Weibo users also discussed the prospect of iPhones rocketing in price thanks to the tariffs, with several people saying that they would switch to using phones made by Chinese companies Huawei or Xiaomi.

Japan’s Nikkei benchmark index has dived 5% while the yen rallied 1% as investors seek refuge as the new US tariff regime bites.

Stocks in Taiwan, meanwhile, fell 5.8% in afternoon trading, AFP is reporting.