Trump’s Tariff Earthquake Shakes America and the World

Following U.S. President Donald Trump’s announcement of new tariff measures, stocks plunged today as investors rushed to seek refuge in bonds, gold, and the yen, fearing that the new U.S. tariffs could intensify a trade war that threatens to push the world into recession.

The Dollar:
According to Reuters, the dollar fell to its lowest level in six months, with U.S. bond yields also declining. Oulu Sonola, head of U.S. economic research at Fitch Ratings, stated: "This could be a game-changer, not just for the U.S. economy but for the global economy." Experts warn that "many countries are likely to enter a recession. If this level of tariffs persists for long, most economic forecasts could collapse."

Oil Markets:
Oil prices dropped by more than 2.5% today amid fears of declining demand for crude due to expectations of a global economic slowdown.

"At 08:45 Moscow time, May futures for U.S. West Texas Intermediate (WTI) crude oil were priced at 69.89 perbarrel,decliningby 69.89 perbarrel,decliningby 2.54 from the previous session's close of $73.13 per barrel. This represents a decrease of 2.43%."

Yeap Jun Rong, market strategist at IG, noted in a statement: "The U.S. tariff announcement clearly caught markets off guard. Earlier speculation suggested fixed tariffs of 15%-20%, but the final decision was far more aggressive." He added, "For oil prices, the focus now shifts to global growth expectations, which are likely to be revised downward due to these higher-than-expected tariffs."

Although the White House clarified that imports of oil, gas, and refined products are exempt from the new tariffs, markets remain wary of weakening demand.

Stocks:
Asian markets, along with U.S. and European futures, collapsed after Trump’s announcement. Tokyo’s Nikkei 225 index fell over 3.4%, hitting an eight-month low.

South Korea, a U.S. ally, also faced a 25% tariff. The benchmark KOSPI index dropped 1.9% at opening, reaching 2,459.30 points. In Australia, the S&P/ASX 200 declined by 1.8%.

S&P 500 futures fell 3%, while Dow Jones Industrial Average futures lost 2%, signaling potential losses when U.S. markets reopen on Thursday.

Gold:
Gold hit a record high at settlement yesterday, with contracts for the precious metal surpassing $3,160 per ounce as demand surged for the safe-haven asset.

On Wednesday, President Trump announced sweeping tariffs in what he called "America’s liberation day," imposing a 25% levy on imported cars and 20% on all other imports. Higher tariffs were also imposed on specific U.S. trade partners: 34% on Chinese imports, 24% on Japanese imports, and 20% on EU imports.

His recent decisions to impose harsh tariffs on imports from Canada, Mexico, and China have sparked strong backlash, potentially setting the stage for a fierce economic confrontation.

 

Tariffs as a Political and Economic Lever:

Mario Abou Zeid, an international relations researcher, told Sky News Arabia that President Trump is launching a trade duel in line with his campaign promises, evident in the 10% tariffs on all Chinese imports and 25% on goods from Mexico and Canada.

This move aligns with Trump’s view that trade deficits with allies are a primary reason for these measures, aiming to pressure countries into concessions that benefit the U.S. economy. Abou Zeid notes that "the U.S. is the world’s largest economic market, making it a prime target for imports from all nations."

Trump’s True Goals:

Despite international outrage, Trump appears to be seeking more than just tariffs. Abou Zeid suggests that "the U.S. president is using economic and trade weapons to achieve political gains and reinforce America’s global standing."

Trump has a clear agenda to renegotiate or fully withdraw from the North American Free Trade Agreement (NAFTA), aiming to improve trade terms with Canada and Mexico.

Is the World Heading Toward a Trade War?

The impact of these policies may extend beyond the U.S. and its direct partners, potentially affecting the entire global economy. According to Abou Zeid, "Canada is already facing an economic crisis with rising inflation and taxes, making it more vulnerable to the new U.S. tariffs."

Amid this escalation, diplomatic solutions remain possible. China has expressed willingness to "return to the negotiation table" with Washington, while Canada and Mexico hope for renewed talks rather than mutual escalation.

Between tariff hikes and potential negotiations, Trump’s decisions will be pivotal in shaping the future of global trade relations.