European stock markets suffered their biggest fall in two months today, after US President Donald Trump slapped tariffs on Brazil and Argentina and fears were raised over a trade-war escalation with China.
Britain’s FTSE 100 finished 0.8 per cent down, hitting a one-week low. Germany’s Dax index and France’s CAC 40 both tumbled two per cent, meanwhile.
The poor readings dragged the pan-European Stoxx 600 down 1.6 per cent, its worst single-day performance since early October.
In the US, the trade-sensitive Nasdaq was down one per cent, while the Dow Jones and S&P 500 were both 0.7 per cent lower.
Investors sold off risk assets after Trump tweeted that he will restore tariffs on steel and aluminium imports from Brazil and Argentina.
The decision, which Trump said was in response to the falling value of the countries’ currencies, ends the exemptions they secured from levies in May 2018. It also highlights how Trump’s protectionism is a cemented part of his foreign policy.
The gloom among traders was compounded when US commerce secretary Wilbur Ross told Fox Business that the Trump administration could increase tariffs on China if a trade deal is not reached soon.
Ross said: “If nothing happens between now and then, the president has made quite clear he’ll put the tariffs in – the increased tariffs.”
The US has already applied tariffs to $550bn worth of Chinese products. In response, China has set levies on $185bn of US goods.
Connor Campbell, financial analyst at trading platform Spreadex, said: “With the markets having done their best to maintain a positive outlook on the US-China situation, despite Hong Kong becoming a political pawn between the two sides, Trump went and added another couple of enemies to his trade war portfolio.”
He added: “It doesn’t take a genius to guess how investors reacted. Reversing their early gains, the Eurozone indices all sank into the red, joined by an irritated Dow Jones.”