Trump’s tariffs rattle global markets

This is an audio transcript of the FT News Briefing podcast episode: ‘Trump’s tariffs rattle global markets’

Marc Filippino
Good morning from the Financial Times. Today is Friday, April 4th and this is your FT News Briefing.

It is a new era in global trade . . . US President Donald Trump’s tariffs sent markets into a tailspin yesterday.

Ian Smith
The scale of what we saw and also the manner in which it was presented definitely has unnerved investors . . . 

Marc Filippino
And his trade policy has left the US economy on shaky ground.

Sam Fleming
There are some economists now that see outright declines in GDP towards the end of this year.

Marc Filippino
I’m Marc Filippino, and here’s the news you need to start your day.

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The tariffs Donald Trump announced on Wednesday rocked global markets. There were major stock sell-offs yesterday with significant drops in Europe’s Stoxx 600, the UK’s FTSE 100 and Japan’s Nikkei 225. In the US, the S&P 500 ended the day down nearly 5 per cent. 

I’m joined now by the FT’s senior markets correspondent Ian Smith to discuss the prognosis. Hey, Ian. 

Ian Smith
Hi, Marc. 

Marc Filippino
So Ian, the reason I say prognosis is based on something Trump posted on social media on Thursday. He said, quote, the operation is over. The patient lived and is healing. Why weren’t markets as optimistic? 

Ian Smith
So, yeah, the patient has certainly taken a bit of a beating and we’ve seen global shares fall everywhere. Yes, we knew that Donald Trump was tariff man and that he would come with tariffs, and he’s been very clear about that. There had been among investors hopes that the tariffs would be more piecemeal or there would be more of a negotiated solution. But the scale of what we saw and also the manner in which it was presented and calculated definitely has unnerved investors and led them to pricing a weaker path for US growth. 

Marc Filippino
Ian, what were some of the hardest-hit corners of the market yesterday?

Ian Smith
So we saw a lot of economically sensitive sectors faring badly. We saw financials faring badly, exporters, as you would expect, suffering further even though they have already suffered. But it was a very broad-based sell-off, both in the US and in Europe and in Asia. And it really was, you know, expectations of worse growth. So that’s led to a massive rally in government bonds and a bit of a rush for safety across markets and yes, any sector that is particularly exposed to the consumer or business sentiment being hit.

Marc Filippino
Ian, we’ve had you on the show to talk about the weakening dollar during this Trump administration. It weakened more again yesterday on the tariff news. What is the perception of the dollar these days, especially given what we heard from Trump on Wednesday? 

Ian Smith
We had a big fall in the dollar on Thursday, one of the most dramatic moves. People were phrasing it to me as this is a confidence moment for dollar assets. There’s been a loss of confidence in dollar assets primarily that’s been expressed through US stocks. And we saw a real strengthening in the euro, which is surprising given that the Eurozone was one of the big targets of the tariffs announced by President Trump. But it just shows how much that consensus has shifted away from dollar strength towards euro strength with the kind of galvanising effect that US isolationism has had on Europe and the stronger prospects for European growth from all of the spending announcements that have been made in response to Trump’s policy. So the euro dramatically jumping wouldn’t have been on your kind of tariff bingo card, but it shows the strange times we’re in now.

Marc Filippino
The big thing going into Wednesday was the idea that markets were volatile because they didn’t know what the plan was for tariffs, Do you think that this period of volatility might recover? Will the patient actually heal now that we can start adapting to what Trump said on Wednesday? 

Ian Smith
So I think crucial to the answer to that question will be how countries retaliate. If there isn’t a huge broad-based sweeping retaliation, it might be that some of the investor fears are lessened. If we start to see in the kind of hard growth inflation data a strengthening in the US economy, confounding the fears that have been expressed, then yes, it’s not inevitable that this will continue. But at the same time there are big investors that are kind of citing a move away from US stocks and US risk assets so that suggests that some of this move might be longer-lasting. 

Marc Filippino
That’s the FT’s Ian Smith. Thanks so much, Ian. 

Ian Smith
Thank you.

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Marc Filippino
All right. So markets are tanking, but what does that mean for Americans like…