Trump's tariffs trigger global market meltdown: How, why?

Dubai: President Donald Trump has imposed the toughest US tariffs in a century, intensifying trade tensions and rattling investors worldwide, sending shockwaves through the global economy and financial markets.

The new policy, announced Wednesday, applies a minimum 10 percent tariff on all foreign imports, with even steeper rates for over 60 nations, including major trade partners like China, the European Union, Japan, Vietnam, and India.

China, in particular, faces tariffs exceeding 50 percent on several goods. "For too long, American workers have been sidelined while other countries gained at our expense," Trump stated at the White House. "Now, it's our turn to thrive."

Major escalation in the trade war

This aggressive move is expected to provoke retaliation from affected nations, adding uncertainty to global markets. Experts warn that rising costs for businesses and consumers could slow economic growth or even trigger a recession.

Trump believes tariffs will strengthen American manufacturing and leverage better trade deals. However, many economists argue that trade barriers often backfire, leading to higher prices and weaker economic ties among nations.

According to Bloomberg Economics, the new tariffs will raise the effective tax rate on over $3 trillion worth of imports to about 23 percent, the highest level in more than a century. This surpasses the protectionist policies of the 1930s, which contributed to economic downturns.

The "reciprocal tariffs" aim to match the barriers imposed by other countries on US exports, but they risk alienating allies and disrupting global supply chains.

Stock markets plunge worldwide

Following the announcement, stock markets worldwide tumbled. US stocks plunged more than 3 percent over two days, with analysts estimating that $1.7 trillion could be wiped from the value of the top 500 US stocks by Thursday. Oil prices also dropped sharply.

Investors are on edge, expecting countermeasures from affected nations. China vowed to respond and urged Washington to reconsider. Japan called the move "deeply regrettable" and suggested it could violate World Trade Organization (WTO) rules. European Union chief Ursula von der Leyen said the bloc was 'preparing for further countermeasures' but she emphasised it was 'not too late to address concerns through negotiations'.

Asian markets were hit hard. Chinese stocks slid, and the yuan weakened. A major Hong Kong-listed index fell over 2.5 percent before partially recovering. Tokyo stocks dropped 2.8 percent, while markets in Sydney, Seoul, Manila, Mumbai, Shanghai, and Singapore also declined. Vietnam’s stock exchange took the worst hit, plunging 7.8 percent due to steep new tariffs.

However, Wellington’s stock market saw slight gains, as New Zealand was less affected by the tariffs.

Trump’s sweeping tariffs have sent shockwaves through the global economy, raising fears of a full-blown trade war with long-lasting effects on international commerce.

- with inputs from Bloomberg