US dollar ‘at risk of confidence crisis’ as Trump tariffs rattle global markets – business live | Trump tariffs

Newsflash: Ratings agency Fitch has cut its credit rating on China.

Fitch has downgraded China’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘A’ from ‘A+’, with a stable outlook.

Fitch says it acted due to China’s rising debts, and deteriorating public finances:

The downgrade reflects our expectations of a continued weakening of China’s public finances and a rapidly rising public debt trajectory during the country’s economic transition. In our view, sustained fiscal stimulus will be deployed to support growth, amid subdued domestic demand, rising tariffs and deflationary pressures.

This support, along with a structural erosion in the revenue base, will likely keep fiscal deficits high. We expect the government debt/GDP to continue its sharp upward trend over the next few years, driven by these high deficits, ongoing crystallisation of contingent liabilities and subdued nominal GDP growth.

This does not appear to be a direct response to Donald Trump’s decision to impose a new 34% tariff rate on China.

Fitch says it has not yet calculated the impact, explaining:

While the 2 April reciprocal tariff announcements are not yet incorporated into our forecasts and there is uncertainty about their impact, there is headroom at the current rating to accommodate the likely implications for economic growth and fiscal metrics.

Analysts at Oxford Economics have calculated that a global recession is likely to be avoided, despite the huge impact of yesterday’s ‘Liberation Day’ tariff hikes

In a report issued today, their Director of Global Macro Research, Ben May, predicts that annual global GDP growth could plausibly fall below 2%.

He writes:

“This would still be some way off the technical definition of a global recession – for this to happen, GDP growth would need to fall below the rate of world population growth, which is currently about 0.9% in annual terms. Nonetheless, it would be the weakest annual growth rate since the global financial crisis, excluding the pandemic period.”

The oil price is cratering, on growing fears that Donald Trump’s trade war could trigger a recession.

Brent crude has now plunged by 5.8% so far today to $70.61 per barrel.

US crude is being hit even harder, down 6% at $67.34 per barrel.

David Morrison, senior market analyst at Trade Nation, says oil has fallen as the scale and scope of Trump’s tariffs, and their impact on the global economy, became apparent.

Energy imports are largely unaffected tariff-wise. But investors were reacting to the estimated damage these tariffs could do to global trade, and therefore global economic growth.

The size of the tariffs are such that business activity could slow sharply, leading to significantly lower demand for oil. These concerns, along with continued uncertainty over how the US’s trading partners will respond, saw front-month WTI drop over 5% in a matter of hours. This comes as members of OPEC+ hold meetings today.

Given previous comments, it seems likely that the group will finally bring an end to its production cuts which have helped support prices for the last two years.

Paul Diggle, chief economist at Aberdeen, suggests the White House may not be displeased by the market reaction.

Diggle says:

So far, the administration appears far more tolerant of market weakness than in Trump’s first term. Indeed, low bond yields and a weaker dollar may be actively helpful market moves give the administration’s preferences.

Diggle also warns that yesterday’s “dramatic” announcements may not represent “peak tariffs”.

He adds:

We still think additional sector specific tariffs are coming, including on semiconductors, copper, lumber and pharmaceuticals.

Indeed, these products were mentioned in the executive order, specifying that the reciprocal tariff policy does not apply to them, therefore leaving open that specific rates will be coming soon. On the other hand, that does seem to mean that sector-specific tariffs and reciprocal tariffs aren’t additive.

Additionally, the Executive Order provides the President with the right to modify tariff rates in the event of retaliatory measures, meaning rates on some trade partners could be pushed higher still.

There is still scope for US tariffs to eventually settle at a lower level, and this is probably still a widespread expectation.

The 10% global baseline is likely a floor, but structuring the reciprocal tariff as an additional rate on top of that at least leaves some chance of it then coming down.

Households across America who own stocks will be watching Wall Street through their fingers today….

Newsflash: U.S.-based employers announced 275,240 job cuts in March, driven by Elon Musk’s slashing of the Federal government.

Consultancy firm Challenger, Gray & Christmas have reported that job cut announcements rose 60% month-on-month, and were 205% higher than in March 2024.

That’s a record high for any March, and the third-highest monthly total ever recorded.

Of that total, 216,670 were due to “DOGE Actions” – Musk’s campaign to improve government efficiency by making drastic cuts to government bureaucracy.

Andrew Challenger, senior vice president and workplace expert for Challenger, Gray & Christmas, explains:

“Job cut announcements were dominated last month by Department of Government Efficiency [DOGE] plans to eliminate positions in the federal government. It would have otherwise been a fairly quiet month for layoffs.”

Here’s a chart showing how Donald Trump’s new tariffs have weakened the US dollar:

Over in Madrid, Spain’s prime minister, Pedro Sánchez, has lambasted Donald Trump’s “protectionist” tariffs against EU products, saying they run “contrary to the interests of millions of citizens on this side of the Atlantic and in the US, who will unfortunately see their businesses and their purchase power” affected by the measures.

In an strongly worded and defiant speech this morning, the socialist leader said the “wrongs of one leader” should not be allowed to impede majority progress, adding that Spain and the EU would use Trump’s “trade war” to become stronger.

Jakub Krupa’s Europe Live blog has full details:

Business secretary says government launching consultation over possible retaliatory tariffs against US

Andrew Sparrow

Over in parliament, business secretary Jonathan Reynolds has told MPs that the UK will consult British businesses on how the Government could impose retaliatory trade tariffs on the US.

In a statement to the House of Commons, Reynolds says he is opening a consultation on possible retaliatory tariffs.

Reynolds explains:

It remains our belief that the best route to economic stability for working people is a negotiated deal with the US that builds on our shared strengths.

However, we do reserve the right to take any action we deem necessary if a deal is not secured.

To enable the UK to have every option open to us in future, I am today launching a request for input on the implications for British businesses of possible retaliatory action. This is a formal step necessary for us to keep all options on the table.

We will seek the views of UK stakeholders over four weeks until 1 May 2025 on products that could potentially be included in any UK tariff response.

This exercise will also give businesses the chance to have their say and influence the design of any possible UK action.

My colleague Andy Sparrow’s Politics Live blog has more details:

Britain’s energy sector is digesting the impact of Donald Trump’s new tariffs.

A senior energy industry executive told the Guardian:

“No one is quite sure what this will mean for the global supply chains.

There is an environment of uncertainty about investment. There are a lot of people being cautious – they’re not making a decision either way about anything. They’re saying, ‘let’s stop, take a breath, and see what happens’.

If you want economic growth that’s not a good thing, and the Chancellor and the Prime minister will no doubt be worrying about that. But there’s a lot that is within the control of the government which can encourage investments if they get the right frameworks and regulation in place. The only country that can screw that up for the UK, is the UK.”

And seperately, RenewableUK’s deputy chief executive Jane Cooper has warned that Trump’s tariffs risk pushing up prices for consumers and harming industry.

Cooper says:

“Tariffs and trade disputes risk pushing up prices for consumers and harming industry, so the priority must be resolving this dispute and developing a UK trade strategy that strengthens our energy security and reduces risks to the UK supply chain. These tariffs, combined with the US Government’s recent moves to halt the development of offshore wind, will mean American and UK companies will miss out on opportunities to trade, invest and collaborate in innovative clean technology.

“While trade in goods for renewables between the US and UK is relatively limited, we are concerned at the wider impact these tariffs could have on the supply chain in the UK and across Europe. Many of our manufacturers operating in the UK – and collectively employing thousands of people here – also have factories in the EU, so President Trump’s announcements will have a far-reaching impact across our sector”.

After a volatile morning on Europe’s financial markets, here’s a quick recap of the situation.

The US dollar has tumbled today as investors fear that Donald Trump’s new trade war could trigger a recession.

The dollar is down around 2% against a basket of other currencies, a sizeable selloff, after investors were startled by the scale of the tariffs announced by the US president last night.

The dollar is now down at a six-month low, with Deutsche Bank warning its clients to “beware a dollar confidence crisis”.

Deutsche says:

The safe haven properties of the dollar are being eroded and this is imposing a significant cost on unhedged dollar holdings. Beyond that, developments since the start of the year make us worried about a broader undermining of confidence in the US economic outlook and the medium-term desirability of dollar allocations.

European stock markets have had a rough morning. Banks and miners have fallen on fears of an economic downturn. Luxury goods stocks are also lower, an anticipation that their exports to the US will be hurt by new tariffs.

Here’s the situation:

• FTSE 100: down 130 points or -1.5% at 8477 points

• Germany’s DAX: down 496 points or 2.2% at 21,894 points

• France’s CAC: down 195 points or 2.5% at 7,662 points.

That followed a sharp plunge in shares across the Asia-Pacific, where Japan’s Nikkei lost 2.7%.

The sell-off came after China was hit with a 34% fee, in addition to a 20% tariff on all Chinese imports already in place, while the EU will now be levied at 20% and Japan at 24%. Trump said America had been “looted, pillaged and raped” by its trading partners: “In many cases, the friend is worse than the foe.”

Wall Street is heading for heavy losses when trading begins in New York at 9.30am local time (2.30pm BST).

Economists are warning that Trump’s tariffs will push the US’s effective tariff rate to its highest level in over a century.

Raphael Olsyzna-Marzys, international economist at J. Safra Sarasin Sustainable Asset Management, says:

The US effective tariff rate is set to rise to around 25%, the highest level since the start of the 20th century. This will have a large and direct negative impact on the US economy, pushing growth lower and prices higher. Global growth will also be weaker.

What happens next will depend on how countries respond, but we expect some escalation before any eventual de-escalation. Outside the US, the most significant impact will be on Germany and Asian economies. A deteriorating growth outlook is likely to push central banks to lower policy rates, but they will need to ensure that longer-term inflation expectations stay anchored. Still, we think that bond yields will fall further and continue to favour intermediate maturities. Current US equity valuations are not priced for a significant slowdown.

We still prefer UK equities, defensives over cyclicals and value overgrowth. Finally, the US dollar is likely to suffer from relative growth headwinds. Safe-haven currencies should do well in the near term.

In other developments:

The new US tariffs could derail the eurozone’s economic recovery and push the region into recession.

Gaurav Ganguly, senior director for economic research at Moody’s Analytics, warns:

“The euro zone economy has recently been displaying signs of recovery, but reciprocal tariffs of 20% on exports to the US will severely damage growth prospects this year and next.

The direct impact of lower exports will drag growth down but even more damaging could be the broader shock to confidence and the tightening of financial conditions that result. If negotiations fail to yield concessions and these tariffs remain in place, the eurozone will slip into recession this year.”

UK farmers warn of tariff impact

Joanna Partridge

Britain’s farmers have warned that tariffs will “increase the challenge for the UK and agriculture” at a time when the US is the largest market outside of the EU for UK agri-food products.

British-made meats, cheese and traditional tastes like tea and biscuits have proved popular with American consumers in recent times. Among agri-food products, Scotch whisky, beer and salmon are commonly transported across the Atlantic.

The National Farmers’ Union (NFU said it also had concerns that food from other nations originally destined for the US may be diverted instead to Britain, “negatively impacting” the UK market.

NFU president Tom Bradshaw said:

“The United States is the largest market for British agri-food products outside of the European Union and our farmers are proud to supply high quality, authentic, and unique British meats and cheeses to American consumers.

We stand united in our desire to work together to ensure British farmers and growers are at the forefront of any decision-making and will continue to work hand in glove with government as the situation develops.”