Donald Trump defies market tumult and pushes ahead with trade war

Unlock the White House Watch newsletter for free

Your guide to what the 2024 US election means for Washington and the world

A global market sell-off has deepened as Donald Trump presses ahead with his plan for aggressive tariffs on America’s largest trading partners even as he touts potential deals with some US allies.

Equities fell sharply just hours before Trump was set to hit a wide range of countries with steep new levies, tilting the world into a full-blown trade war.

White House officials, including Treasury secretary Scott Bessent, have sought to talk up possible trade negotiations with South Korea, Japan and other countries — a message that gave hope to investors that Trump could soften his stance after pressure from billionaire allies, trading partners and Republicans in Congress.

But any relief was shortlived as it became clear Trump was pushing ahead with his plan to slap tariffs on trading partners.

At a fundraising event for Republicans in Congress on Tuesday night, Trump struck a defiant tone, saying other countries “want to make a deal with us” but the US did not “necessarily” need any agreements and was “happy the way we are”. He added: “I know what the hell I’m doing.”

The new blitz of tariffs will include additional levies on China, despite Beijing’s warning that it would “fight to the end” in a fast-developing trade conflict.

The US’s extra 50 per cent tariff on China, the world’s second-largest economy, would “be going into effect at 12.01am” Eastern time on Wednesday, said White House press secretary Karoline Leavitt.

“Everyone keeps hoping, keeps waiting for a pause in tariffs,” said Peter Tchir, head of macro strategy at Academy Securities. “But we’ve just slapped on the extra increased tariffs on China. We’re slowly losing this optimism that this is a negotiating tactic. That’s why trading has been so volatile today.”

The benchmark S&P 500 index was up as much as 4.1 per cent early on Tuesday but ended with a loss of 1.6 per cent after Leavitt’s remarks — marking a fourth consecutive day of intense turbulence in US equities.

Apple, which is heavily exposed to China through its supply chains, has dropped more than 8 per cent this week as investors worry about its margins. Asian stocks fell in early trading on Wednesday.

The $29tn US Treasury market has also come under rising selling pressure in the past two days, sending long-term borrowing costs higher.

“Market price action has been dramatic,” Goldman Sachs said in a note to clients. “Our estimates of ‘shocks’ to market views using the joint movements of US equities and bonds are consistent with a large downgrade to US growth views.”

The additional levies on China mean its exports to the US will face duties of more than 104 per cent, a level that will be seen as a provocation by Beijing, which has retaliated with its own 34 per cent tax on US goods.

Alongside the new China duties, the US will also impose taxes on almost all other imports — the “reciprocal” tariffs Trump announced during “liberation day” last week — starting on Wednesday.

Since then, $6.2tn in market value has been wiped from the S&P 500 index, and analysts have warned of spiralling inflation in the US and a slowdown in the global economy.

Oil markets have also slumped on expectations of a sharp slowdown in global trade. Brent crude, the international benchmark, fell as much as 4.1 per cent in Asian trading on Wednesday to $60.26 a barrel, the lowest since the depths of the Covid-19 pandemic in early 2021.

West Texas Intermediate, the US benchmark, traded below $60, a level that drillers have said will thwart Trump’s ambitions to increase American crude supply.

The president’s determination to follow through with his ultra-protectionist tariffs has drawn a fierce backlash from Wall Street, business leaders and some Republican lawmakers.

The looming trade war and economic disruption has also opened divisions within Trump’s own circle. While Bessent on Monday described his plan to launch talks with Japan over a new trade deal, Trump’s trade tsar Peter Navarro wrote in the Financial Times that the president’s position was “not a negotiation”.

Elon Musk, the technology billionaire and Trump adviser, on Tuesday attacked Navarro, calling him a “moron” and “dumber than a sack of bricks” after Navarro suggested the Tesla boss’s opposition to tariffs was self-interested.

Additional reporting by William Sandlund in Hong Kong