Stock markets in Europe fell as the continent’s leaders warned that Donald Trump’s trade war would wreak havoc on the global economy.
As investors fretted ahead of the US president’s ‘Liberation Day’ announcement at the White House, European Central Bank president Christine Lagarde said tariffs would be ‘negative the world over’.
And Chancellor Racher Reeves warned that the UK will be hurt by tariffs even if ministers successfully agree a deal with the US.
Speculation over what Trump was planning has rattled financial markets in recent weeks.
The major European benchmarks have made gains so far this year, however, with the FTSE 100 up more than 5 per cent in London despite the slide of 0.3% to 8608.48.
The German DAX fell 0.66 per cent yesterday but is still up more than 11 per cent in 2025 – boosted by the promise of increased defence spending and billions of investment in infrastructure.
Warning: As Donald Trump (left) prepared to give his ‘Liberation Day’ announcement, ECB president Christine Lagarde (right) said tariffs would be ‘negative the world over’
By contrast, US markets are lower, with the technology-heavy Nasdaq down close to 9pc.
Gold prices hovered near record highs at $3,133 per ounce yesterday as investors continued to pile in to save haven assets due to the uncertainty.
‘I can’t recall a situation where the stakes were this high and yet the outcome was so unpredictable,’ said Steve Sosnick, chief strategist at Interactive Brokers. ‘The devil is going to be in the details and nobody knows the details.’
Larry Fink, the boss of Blackrock, this week warned that investors are more worried about the economy ‘than at any time in recent memory’, saying ‘protectionism has returned with force’.
Some leaders, including in the EU and Canada, have said they are prepared to retaliate, adding to investor nerves that the trade war will escalate.
But there were hopes that the President will be willing to negotiate.
Speaking in Dublin, Lagarde said: ‘It will be negative the world over and the density and the durability of the impact will vary depending on the scope, on the products targeted, on how long it lasts, on whether or not there are negotiations.
‘Let’s not forget quite often those escalations of tariffs, because they prove harmful, even for those who inflict it, lead to negotiation tables where people actually sit down and discuss and eventually remove some of those barriers.’
And Reeves warned that the UK economy will feel the effects of tariffs regardless of whether a deal with the US is secured.
‘If we are able to secure an economic agreement with the United States… it doesn’t mean that somehow we are therefore out of the woods and not impacted by tariffs,’ she told MPs on the Treasury select committee.
‘The specific tariffs on the UK are less relevant to the growth and inflation impacts than the global picture because we are an open trading economy and depressed demand from overseas because of tariffs, higher inflation overseas because of tariffs has a direct impact on the UK.’
Trump has already imopsed new 20p tariffs on imports from China and 25 per cent levies on swathes of goods from Mexico and Canada.
He has also put a 25 per cent global tariff on imports of steel and aluminium and pledged to put the same rate on car imports.
‘This isn’t protectionism. It’s restoration,’ insisted Trump’s trade adviser Peter Navarro.
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