Global markets are experiencing a highly volatile session this Tuesday, with widespread declines driven by fears of an escalating trade war between the United States and its key economic partners. The implementation of new tariffs by Washington on products from China, Mexico, and Canada, along with retaliatory measures announced by these countries, has created uncertainty among investors concerned about the impact on global economic growth.
On Tuesday, U.S. tariffs of 25% on Canadian and Mexican products took effect, a measure criticized by both countries and the European Union. Additionally, the U.S. doubled tariffs on several Chinese imports, raising them from 10% to 20%. In response, Beijing announced levies of 10% and 15% on a range of U.S. agricultural products, including beef, corn, and soybeans.
“There is still uncertainty in the market about whether these tariffs will remain in place for the long term,” said Jim Reid, an analyst at Deutsche Bank. However, the growing trade tensions have weakened investor confidence, with concerns that these measures could extend to Europe, another key U.S. trading partner.
The European Union has already expressed its concerns. “These tariffs threaten deeply integrated supply chains, investment flows, and transatlantic economic stability,” said Olof Gill, EU Trade spokesperson. Meanwhile, French Economy Minister Eric Lombard stated that the bloc will not yield easily: “Our negotiators are playing hardball, and so will we. We need a balanced agreement to protect our economies.”
European and Asian stock markets saw significant losses. In Europe, Germany’s DAX fell 2.3%, France’s CAC 40 lost 1.4%, and London’s FTSE 100 dropped 0.5%. In Asia, Tokyo’s Nikkei 225 declined 1.2%, and Hong Kong’s Hang Seng fell 0.4%, while Shanghai’s Composite Index managed a slight 0.2% gain.
On Wall Street, S&P 500 and Nasdaq futures fell 0.6% each before the market opened, while Dow Jones futures slipped 0.3%. These declines add to Monday’s sell-off, which reduced S&P 500 gains since the election to just over 1%, down from a peak of over 6%.
“March’s rally didn’t last long… after a series of events hit market sentiment,” commented Kathleen Brooks, research director at XTB. Among these events are the tariffs, uncertainty over the Ukraine peace deal, and OPEC+ plans to increase oil production.
Oil prices also fell on Tuesday after OPEC+ confirmed its plans to boost production starting next month. Brent crude, the European benchmark, dropped 1.61% to $70.47 per barrel, its lowest level since January. West Texas Intermediate (WTI), the U.S. benchmark, fell 1.26% to $67.51 per barrel.
Conversely, safe-haven assets in times of uncertainty, such as gold and the euro, recorded gains. Gold rose 0.91% to $2,919.7 per ounce, while the euro appreciated against the dollar, trading at $1.054.
Amid this scenario, investors are watching for potential economic stimulus measures that China may announce during its annual parliamentary meeting, the National People’s Congress. Additionally, the European Central Bank (ECB) is expected to cut interest rates again on Thursday in an effort to boost the struggling eurozone economy.
On Friday, all eyes will be on U.S. employment data, which could provide more insight into the health of the world’s largest economy. However, analysts warn that geopolitical and trade uncertainty will remain a key factor influencing markets in the short term.
