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Donald Trump has pushed the world into a full-blown trade war, defying market turmoil as sweeping tariffs against dozens of US trading partners came into effect.
With no last-minute reprieve from the White House, the president’s so-called reciprocal tariffs came into force at midnight in Washington on Wednesday. They include a 104 per cent levy on China that will slash trade between the world’s two largest economies.
The US tariffs mark a profound reversal to decades of liberalisation in the world economy and will — if sustained — lead to a complete reshaping of global trade patterns.
A sell-off in markets deepened in Asia, extending a rout that began when Trump first announced the tariffs on “liberation day” last week. US Treasuries, the dollar and stock futures all fell early on Wednesday.
The historic decision to impose tariffs caps the aggressive trade policy Trump has pursued since returning to office, as the US president tries to remake a global economic order he says has “ripped off” America for decades.
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.
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 US’s extra 50 per cent tariff on China, to punish Beijing for retaliation, would “be going into effect at 12.01am” on Wednesday, said White House press secretary Karoline Leavitt.
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.”
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 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 trade war has also opened divisions within Trump’s own circle. While Bessent has 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