Stock markets dive as tariffs spark recession fears

Stock markets across Europe and Asia plunged on Monday as fears over the global impact of US President Donald Trump’s trade tariffs deepened.

The FTSE 100 opened more than 5% lower, following its steepest fall in five years on Friday.

Germany’s Dax plummeted 10% in the first few minutes of trading, before recovering ground, after Asian markets dropped steeply overnight, with Hong Kong’s Hang Seng experiencing its fourth-biggest one-day decline ever.

US markets were also set to open lower as economists warned that a recession in the country is now looking increasingly likely.

On Thursday, Trump announced tariffs on the US’s trading partners, many of which were steeper than economists had expected.

As traders digested the news, US markets experienced their worst week since the beginning of the Covid pandemic in 2020, with more than $5 trillion (£3.9tn) erased from the S&P 500.

Economists speculated that may countries would attempt to negotiate deals on the tariffs.

But on Sunday night Trump doubled down, telling reporters that “sometimes you have to take medicine to fix something”.

If world leaders are unable to negotiate deals with Trump, the tariffs may have a destructive effect on economies globally, analysts have warned.

“Fundamentally, investors are worried about a big hit to corporate earnings and a massive slowdown in economic growth,” said Russ Mould, investment director at AJ Bell.

On Monday, economists at US banking giant Goldman Sachs predicted a 45% chance of a recession in the US if Trump does not negotiate deals on the tariffs.

That came after JP Morgan, another US bank, said it saw a 60% chance of recession in the country.

The tariffs could lead to a 0.8% fall in the UK’s GDP growth in 2025, added economists at KPMG.

“There is a strong incentive to seek a negotiated settlement that diminishes the need for tariffs,” said Yael Selfin, KPMG’s chief economist.

Meanwhile, worries about a trade war between the US and China sent the price of Brent crude oil down more than 4%, following a fall of more than 10% last week.

That came after China hit back at the US’s announcement, with its own 34% tariffs on goods going into the country.

Copper, a good indicator for confidence among manufacturers, fell.

However, gold, which is usually seen as a “safe” investment when share prices are falling, also dropped slightly.