As President Donald Trump’s growing trade war saps trillions of dollars off the value of the world’s biggest corporations and fuels worries of a possible US recession, global financial markets have descended into anarchy. Wide-ranging disruptions in international markets brought on by the trade war have greatly affected companies, investors, and consumers all over.
Trump’s choice to levy tariffs ranging from 10% to 50% on items imported from US trade partners—including both friends and foes—has heightened worries of a significant economic collapse. About $2.5 trillion in market value was lost on Wall Street as the financial markets responded unfavourably; share prices in other key financial centres across dropped.
Targeting nations as varied as China, the European Union, and Vietnam, experts are warning that these broad tariffs might cause the global economy to enter a recession while severely depressing the US economy, which has already been showing signs of slowing down. From digital behemoths like Apple to regular consumer goods, the trade war is causing waves through the worldwide supply chain.
Why Are Global Concerns About Trump's Tariff Policy Rising?
Such extensive levies have caused great worry among analysts and world leaders. Strongly attacked Trump’s trade war policies by world leaders ranging from Brussels to Beijing Particularly China denounced the “unilateral bullying” strategies used by the US, while the European Union declared it would create countermeasures. The EU’s answer can include retaliatory tariffs on US imports, further aggravating the situation.
President Trump underlined in a press conference in the White House Rose Garden his will to proceed with the policies despite the market turbulence by downplaying the effect of the tariffs. He timed his speech precisely to avoid squarely addressing the stock market collapse that had happened just hours earlier. Trump’s comments were meant to uphold his position, but the sell-off in world markets got more severe when Asian exchanges opened the following day.
Many observers were reminded of past market collapses during times of global economic crises, such as the 2008 financial crisis and the market turbulence during the height of the COVID-19 epidemic, by this unexpected slump. Declining 133 points, or 1.5%, the UK’s FTSE 100 index of blue-chip businesses dropped from its best day since August. With the tech-heavy Nasdaq witnessing the biggest decrease of 5.97%, followed by the S&P 500 and the Dow falling 4.8% and 3.9%, respectively, all three main US stock indices concluded the day in negative territory across the Atlantic.
How Is the Trade War Affecting Big Companies?
Multinational companies depending on intricate worldwide supply chains have suffered especially from the continuous trade war. Leading US IT company Apple saw a huge loss in value as its stock price dropped 9.5%. Apple, which produces most of its goods in China, is seeing higher expenses because of Trump administration tariffs.
As the repercussions of the trade war permeated their operations, other companies dependent on worldwide manufacturing and commerce—including Microsoft, Nvidia, Dell, and HP—also saw dramatic stock price drops. The suffering transcended technological businesses. Industries that import finished goods and raw materials from tariff-affected nations likewise showed a steep decline in stock values.
As worries about the long-term consequences of the trade war kept developing, commodities suffered as well; oil prices dropped by 7%. Market analysts believe that the tariffs could cause businesses dependent on raw material imports to pay more, thereby influencing consumers with more expensive daily products.
Head of US public policy at Pimco, one of the biggest bond fund managers worldwide, Libby Cantrill, said investors are growing more worried. She said that the rising fear among market players was mostly caused by Trump’s refusal to change his position in the face of market volatility. “There is likely a limit on how much pain he and his administration are ready to endure to rebalance the economy, but when that is or what that looks like remains to be seen,” Cantrill said.
How Will the US Dollar Be Affected?
Long seen as a safe-haven currency in times of world economic instability, the trade war is also seriously affecting the US dollar. Thursday morning, the US dollar sank 2.2% against other major currencies, marking a six-month low as confidence in the currency kept eroding.
Head of foreign exchange research at Deutsche Bank George Saravelos forewarned of a “dollar confidence crisis”. Trump’s aggressive trade war policies are erasing the long-standing reputation of the US dollar as the most stable and secure currency in the world, he observed. Many investors are shifting away from the dollar due to worries of a worldwide economic crisis, hence fuelling its rapid drop.
How Does Trump's Trade War Affect Less Developed Nations?
Although the trade war has major consequences for rich countries, the repercussions for underdeveloped ones are much more noticeable. With Cambodia having a tariff rate of 49%, nations in Southeast Asia like Cambodia, Vietnam, and Myanmar are among those with some of the highest rates. These nations mostly rely on exports to the US, especially in sectors like garment manufacturing, whose costs are now rising because of tariffs.
For countries like Cambodia, where about one in five people live below the poverty line, the tariffs will worsen already existing economic difficulties. Already ravaged by the effects of civil upheaval and a catastrophic earthquake, Myanmar now confronts a 44% tariff that might completely ruin any prospect for economic recovery.
Sportswear firms like Nike, Adidas, and Puma—which rely on Southeast Asia for manufacturing—are also witnessing growing expenses. These increasing production costs are expected by analysts to cause customers all around to pay more. As a result, businesses depending on low-cost manufacturing in these nations are likely to suffer, therefore influencing the world supply chain.
Long term, how will the US economy be impacted?
Trump’s trade war may have disastrous effects on the US economy in the long run. Anticipated to be the highest average tariff since 1933 are the most recent tariff policies. Experts claim that this might cause the US to enter a recession as well as increase consumer living expenses.
By lowering imports by $900 billion by 2025, the tariff plan may cause a $1.8 trillion tax increase for US households, according a Tax Foundation analysis. Apart from the immediate financial expenses, the trade war may cause a decline in consumer confidence and hence weaker demand for goods and services all over the economy.
Oxford Economics researchers estimate that global economic development would slow down to its lowest yearly pace since the financial crisis of 2008. Particularly in developing nations dependent on trade with the US and other affluent nations, the trade war is projected to be a big drag on the world economy.
How Are Other Nations Reacting to Trump's Tariff Strategy?
Reacting to Trump’s trade war with counter-tariffs of their own, nations all across are Though continuous efforts to reach an agreement with the US, the UK, with a rather lower tariff rate of 10%, has already signalled that it would take retaliation actions. In response, the UK government compiled an extensive list of US goods on which it might levy duties including meat, cheese, whisky, and motorcycles.
Retaliation taxes, expected to target US consumer and industrial goods including famous commodities like blue denim, orange juice, and Harley-Davidson motorbikes, are also being ready by the European Union. These counteractions can intensify the trade conflict and prolong the time of economic uncertainty.
In essence, a worldwide economic crisis in formation?
Trump’s tariffs have set off a severe worldwide economic crisis marked by mounting anxiety about a full recession. The actual influence of the trade war is yet unknown as the US dollar loses its position as the safe-haven currency of the globe and market mood collapses. The US president’s aggressive trade war plans could either transform world trade relations or inflict long-lasting damage to the US economy and beyond, without an instant fix in view. The mounting reaction of world leaders and the intensifying economic crisis imply that the trade war might keep getting more intense and have maybe far-reaching effects on the world economy.
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