Global stock markets reeling following Trump's tariffs shock

Financial markets around the world are reeling in the wake of U.S. President Donald Trump's latest and most severe volley of tariffs — and the U.S. stock market may be taking the worst of it.

The S&P 500 was down four per cent in early trading Thursday, while the Dow Jones Industrial Average was down 3.5 per cent  and the Nasdaq composite was off 5.10 per cent.

The Canadian dollar traded for 71.19 cents US, compared with 69.83 cents US on Wednesday.

Little was spared as fear flared globally about the potentially higher inflation and weakening economic growth that tariffs can create. 

Trump said he would impose a 10 per cent baseline tariff on all imports to the United States and higher duties on some of the country's biggest trading partners. The new levies ratchet up a trade war that Trump kicked off on his return to the White House.

Investors dashed to the relative safety of bonds, gold and the yen. U.S. Treasury yields slid, China's yuan dropped to a seven-week low, and the dollar came under heavy selling pressure.

The dollar index, which measures the U.S. currency against six others, fell 1.6 per cent to 102.03, its lowest since early October. The dollar index is down more than 5.7 per cent this year.

The euro, the largest component in the index, gained 1.5 per cent to a six-month high of $1.1021 US.

The yen strengthened to a three-week high against the dollar and was last up 1.7 per cent at 146.76 per dollar, while the Swiss franc touched its strongest level in five months at 0.86555 per dollar.

"It's very difficult actually to see how other countries make concessions that would encourage the U.S. to lift these tariffs. And I think that's a big underpriced risk," said Nicholas Rees, head of macro research at Monex Europe.

Big tech, retailers feel early pain

Apple sank 6.5 per cent, hit by an aggregate 54 per cent tariff on China — the base for much of Apple's manufacturing. Microsoft dropped 1.8 per cent, Nvidia slipped 3.5 per cent and Amazon.com fell 5.1 per cent.

"Eye-watering tariffs on a country-by-country basis scream 'negotiation tactic,' which will keep markets on edge for the foreseeable future," said Adam Hetts, global head of multi-asset and a portfolio manager at Janus Henderson Investors.

WATCH | Prices for new cars, auto parts expected to rise: Canada’s auto sector is bracing for the potential impacts of 25 per cent U.S. tariffs while steel and aluminum makers, already hit with tariffs, are struggling with added costs and lost business.

Retailers were hit hard on Thursday, with Lulemon falling 10.3 per cent, Nike dropping 8.3 per cent and Walmart 6.2 per cent after Trump imposed some of the most punitive tariff rates on major production hubs including Vietnam, Cambodia, Indonesia and China.

Auto industry heavyweights were also also down — General Motors by two per cent and Tesla falling about five per cent.

Wall Street's fear gauge, the CBOE Volatility index, touched a three-week high at 25.64 points.

EU plots response

EU chief Ursula von der Leyen described the tariffs as a major blow to the world economy and said the 27-member bloc was prepared to respond with countermeasures if talks with Washington failed.

Von der Leyen said the EU was already finalizing a first package of tariffs on up to 26 billion euros ($28.4 billion US) of U.S. goods for mid-April in response to American steel and aluminum tariffs that took effect on March 12.

"And we're now preparing for further countermeasures to protect our interests and our businesses if negotiations fail," von der Leyen said in a statement she read out in the Uzbek city of Samarkand on Thursday, ahead of an EU-Central Asia partnership summit.

LISTEN l Potomac Strategy Group's Eric Miller, international trade consultant, on the tariffs:  

Front Burner29:13Trump's trade war goes global

The EU also faces 25 per cent U.S. tariffs on steel and aluminum tariffs, on cars from Thursday and on car parts within a month, with pharmaceuticals possibly to come.

French President Emmanuel Macron on Thursday will host representatives of business sectors that will be hit by the new tariffs, which apply from Saturday.