Trump tariffs shake global markets

Donald Trump revealed details of his trade policy to reduce what he deemed a long-established imbalance and unfairness in the world trade system. The tariffs were more aggressive than the market expected and resulted in a flight to bonds and a fall in equity markets worldwide.

Mr Trump invoked the International Emergency Economic Powers Act 1977 to allow him to proceed by imposing tariffs on countries that impose high tariffs and other barriers on US trade. From 5 April, he will impose a universal tariff of 10%, with many countries attracting a higher rate if they run persistent trade surpluses with the US based on restrictive policies and high tariffs. The announcement resulted in some speculating over a US recession, but countries have been given the chance to negotiate and remove their own trade barriers to get the level of tariffs on their exports reduced.

Britain has got off comparatively lightly. Mr Trump has hit the UK with the baseline tariffs of 10% applied to all US imports, but the government had expected a level of 20%. Nevertheless, this barrier to trade could impact growth and the government finances, giving Chancellor Rachel Reeves an additional challenge as she tries to balance the UK books while sticking to her self-imposed fiscal rules.

In UK equities, the FTSE 100 was 4.6% lower over the week by mid-session on Friday, with the more UK-focused FTSE 250 down 5.4%.

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Geopolitics

Equity markets around the world fell after Donald Trump unveiled details of his trade policy. The levels were more aggressive than the market had expected and resulted in a flight to less risky investments such as bonds. Although unlikely, the announcement has prompted concerns about a potential US recession to emerge once more.

Mr Trump insists that reciprocal action, where tariffs are raised to match those of other nations, is needed because the world’s biggest economy had been “ripped off by every country in the world”. He has deemed the day of this announcement “Liberation Day”. Countries have been given the option of negotiating with the US administration to try and resolve the issues by reducing their own tariff and non-tariff barriers to try and get some of the tariffs reduced. The specific rate depends on a country’s own tariff schedule and non-tariff barriers to US businesses. The administration has insisted that these tariffs can be regarded as the maximum that will be levied unless a country retaliates with additional measures of their own. This will result in the US matching those moves and increasing tariffs on that nation in a tit-for-tat manner.

• How should investors react to the current tariff uncertainty?
• How damaging are the Trump tariffs?

Donald Trump said he was angry with Russian leader Vladimir Putin over his refusal to accept a ceasefire in Ukraine. Mr Trump said he will consider imposing secondary sanctions on all oil coming out of Russia if they are not serious about bringing this conflict to a peaceful resolution. The Reuters news agency reported that officials inside the White House and state department have acknowledged Vladimir Putin is actively resisting peace efforts and are discussing how to push Russia closer to a deal.

Israel’s defence minister said the country intends to “seize large areas” of the Gaza Strip amid a major expansion of aerial and ground operations in the Palestinian territory. Israel Katz said in a statement that “troops will move to clear areas of terrorists and infrastructure and seize extensive territory that will be added to the state of Israel’s security areas”. Mr Katz also said he was calling on Palestinian civilians to flee areas where fighting had returned following the collapse of a ceasefire between Israel and Hamas last month and to “act now to overthrow Hamas and return all the hostages”.

Economics

Mr Trump expressed strong confidence in the resilience of the US economy following the tariff announcement, declaring that the economic “operation” was a success. “The operation is complete! The patient has survived and is on the mend,” Mr Trump wrote on his Truth Social media outlet. “The prognosis is that the patient will be far stronger, bigger, better, and more resilient than ever before,” he continued, framing the tariffs as part of a larger effort to strengthen the US economy.

Annual sales growth at UK grocery stores slowed to its lowest level in 10 months during March, according to data from research firm Kantar, as promotional activity picked up. Take-home sales across the grocery sector rose by just 1.8% over the four weeks to 23 March when compared with last year and with 3.6% growth the previous month. Over the period, grocery price inflation rose to 3.5%, up from 3.3% in February.

This month, utility prices will be increased and tax rises will be introduced. What does this mean for the UK economy and markets? Taxes and utility bills are going up.

Companies

Elon Musk says that his AI venture xAI has acquired his social media platform X, formerly known as Twitter. The all-stock transaction valued xAI at $80bn and X at $33bn. Mr Musk paid $44bn for Twitter in 2022. The move may be aimed at protecting investors, who helped him buy X, from losing money.

Travis Perkins shares fell to their lowest level in almost 16 years after annual results showed a 99% fall in operating profit as it faced lower market volumes and underperformance in its builders merchanting segment. The construction sector supplier also said the timing of a recovery in the sector remains hard to forecast and lowered its outlook for 2025.

Shares in Currys surged after the electrical retailer lifted full-year earnings guidance following “robust” trading since the start of the year. This included a return to growth at its Nordics division, which has been troubled for some time.

SSE trimmed its full-year earnings guidance as 'variable weather' conditions continue to impact the group's renewable energy output. Wind output has been bolstered by investment in capacity, but cold spells and stormy weather have weighed on SSE's distribution network. Management expects to post renewables output of around 13 terawatt-hours for the 12 months to 28 March, 17% higher than the prior year. The group’s guidance for full-year adjusted earnings per share of 155p to 160p, down from recent guidance of 154p to 163p.

Budget airline Ryanair reported a 10% jump in passenger numbers during March. Traffic rose to 15 million from 13.6 million in March 2024, while the load factor – which gauges how full the planes were – was stable at 93%. Rival Wizz Air said March passenger numbers rose 6.7% year on year to 5.1 million. Its load factor edged down slightly by 0.3 percentage points to 90.5%.

Shares in Pets at Home fell after management said its profits were set to fall in the current year as an uncertain economic backdrop and increased costs take their toll. However, in its update for the year to 27 March 2025, the company said group underlying pre-tax profit is expected to be £133m, in line with previous guidance.

Management at engineering and consulting business Wood Group said that its shares would most likely be suspended from trading on the London Stock Exchange after finding "material weakness and failures" in its books.