Stock markets experience a downturn due to Trump's posts on social media platforms
United States President Donald Trump's renewed trade threats on Friday prompted a sell-off on stock markets across the western world, as the president threatened to impose tariffs on all Apple products manufactured outside the US and EU imports starting June.
The S&P 500 index in the US opened with a 1.62% drop, reflecting traders' concerns over the escalating trade disputes. Shares of Apple, a major component of the index, fell by 3.72% in response to Trump's plans to introduce a 25% import tax on iPhones built outside the US.
Trump took to Truth Social to state that he had notified Apple CEO Tim Cook of his intention for all iPhones sold in the US to be made domestically, rather than in countries like India or elsewhere. If this condition is not met, he added, Apple would be required to pay a 25% tariff to the US.
In addition to his threats regarding Apple, Trump also pledged a 50% tariff on all EU imports, effective June 1. This news sent European stocks plummeting. The pan-European STOXX 600 index fell close to two per cent, pushing it into a weekly fall for the first time in over a month. The blue-chip indices in France and Germany also experienced significant drops, with Paris' Cac and Frankfurt's DAX falling 1.65% and 1.54% respectively.
Commenting on the situation, Susannah Streeter, head of money and markets at Hargreaves Lansdown, said, "Trump's chilly stance towards European trade negotiations has stirred fresh fears that punishing tariffs could become a reality for the EU."
The negative sentiment spilled over into London-listed equities. The FTSE 100 initially fell by 1.35%, but eventually closed down a more modest 0.24%.
Proposed tariffs on Apple and EU imports could have significant implications for global stock markets. Apple stands to face increased costs and potentially lower sales due to higher prices and reduced demand. European exporters such as the automotive industry could also suffer loses as market share dwindles and retaliatory measures are imposed.
The escalation of trade tensions could lead to increased volatility in global stock markets, with emerging markets and export-reliant countries likely to underperform. Safe-haven assets like gold, U.S. Treasuries, and the Japanese yen could experience growth as investors seek security amidst uncertain economic conditions.
In the long term, prolonged trade wars could halt global growth and lower stock valuations across sectors. Meanwhile, some U.S. manufacturers may benefit from reduced foreign competition, although overall, the impacts on global growth and valuations are likely to be negative.
The extent of the impact will depend on the scale, scope, and duration of the tariffs, as well as the responses from trading partners. The proposed tariffs have added another layer of uncertainty to an already volatile market environment.
- The S&P 500 index in the US experienced a 1.62% drop due to traders' concerns over escalating trade disputes, particularly Trump's threats towards Apple and EU imports.
- Shares of Apple, a major component of the S&P 500, fell by 3.72% in response to Trump's plans for a 25% import tax on iPhones made outside the US.
- The pan-European STOXX 600 index fell close to two per cent, pushing it into a weekly fall for the first time in over a month, due to Trump's proposed 50% tariff on all EU imports, effective June 1.
- The escalation of trade tensions could lead to increased volatility in global stock markets, with safe-haven assets like gold, U.S. Treasuries, and the Japanese yen potentially experiencing growth as investors seek security amidst uncertain economic conditions.
