Chinese Retaliatory Tariffs Trigger New Downturn in Global Markets

On European stock exchanges on Thursday afternoon, the major indices sharply declined further, on top of yesterday’s significant losses, after China announced it would impose retaliatory tariffs on American products at a rate of 34 percent, while American futures indices indicate new brutal sell-offs. The Zagreb Stock Exchange was not spared from the sharp decline either. China, which has faced a total tariff of 54 percent on its goods exported to the U.S., announced on Friday that it would respond by imposing tariffs on American goods at a rate of 34 percent, starting from April 10.

The pan-European STOXX 600 index of leading European stocks was down 4.42 percent at 12:50 PM and is on track for a weekly loss of 7.5 percent. The London FTSE index plummeted 3.6 percent to 8,169 points, the Frankfurt DAX fell by 4.74 percent to 20,682 points, and the Paris CAC dropped by 4.11 percent to 7,283 points. The biggest loss among significant European stock markets was recorded by the Italian FTSE MIB, which fell 7.3 percent to 34,376 points. On the Zagreb Stock Exchange, indices are also significantly down by about two percent, with Crobex at 3,200 points and Crobex10 at 1,999 points. Both indices have now erased all gains made this year.

GDP Growth Estimates Lowered

Economists are still trying to assess the extent of the consequences of these tariffs, which will depend on how long the tariffs remain in their current form and how other nations will respond. The European Union stated on Thursday that it would prepare countermeasures against the U.S. if negotiations fail. French President Emmanuel Macron urged French companies to pause planned investments in the U.S., while acting German Economy Minister Robert Habeck said that Trump would ‘cave under pressure’ if Europe unites in its response.

The EU is affected by additional tariffs of 20 percent, the United Kingdom by 10 percent, Norway by 15 percent, and Switzerland by 31 percent. Economists from Goldman Sachs wrote to their clients on Friday that tariffs on goods from the United Kingdom are lower than others, but still higher than expected, leading to a reduction in their growth forecast for the British economy this year from 0.8 to 0.7 percent. The investment bank also lowered its growth outlook for Switzerland, Sweden, and Norway.

Another Day of Sell-Offs on Wall Street

American futures indices indicate that another day of brutal stock sell-offs will follow at today’s opening of Wall Street. The futures index linked to Dow Jones lost 1,078 points or 2.6 percent at 12:40 PM, following the announcement of Chinese retaliatory tariffs. The futures S&P 500 index is also down by 1,679 points or 2.6 percent, after already plummeting 4.84 percent the day before.

The Nasdaq futures index fell by 3 percent, as many American technology companies are exposed to the Chinese market. In electronic trading before the official opening of the stock exchange, the stock prices of technology companies Apple and Tesla dropped another 5 percent, while Qualcomm and Nvidia fell by 6 percent.

– The Trump administration may be playing a game with trade partners about who will look away first and be the coward, but market participants are not willing to wait for the results of that game. Investors sell first and then ask questions – said Michael Arone, chief investment strategist at SPDR in State Street Global Advisors.

In general, today the prices of banking stocks fell the most, nearly 10 percent, following yesterday’s drop of 5.53 percent. This sector is considered vulnerable to economic slowdown or recession, which is now estimated to have a real possibility of occurring both in the U.S. and globally. Bank of America strategists announced on Friday that banks are also ‘among the assets least priced for macroeconomic problems in the global economy.’ Among the hardest-hit sectors is the shipping sector, where stocks of the largest shipping companies like Maersk and Hapag-Lloyd fell by 9 percent.

Dollar Under Pressure

The most obvious sign of nervousness regarding the health of the American economy and markets is the decline of the dollar index, which measures the performance of the dollar against six major world currencies. On Thursday, it fell by 1.9 percent, the largest drop since November 2022. The dollar slightly ‘licked its wounds’ on Friday morning in the foreign exchange markets, but continues to hover around 102 points, following the announcement of Chinese tariffs.

At the same time, the euro is currently at its highest level against the dollar in the last six months at 1.104 dollars. The Japanese yen and Swiss franc, which are considered safe havens for capital in uncertain times due to their countries having large trade surpluses, rose by about 0.6 and 1 percent against the dollar, respectively.