The US president has downplayed the market decline and given investors mixed signals about whether the tariffs will remain in place long-term, describing them as "permanent" but also boasting that he is pressuring other leaders to ask for negotiations.
Donald Trump's "reciprocal" tariffs on dozens of countries went into effect Wednesday, including massive 104% tariffs on Chinese goods, as the European Union prepared retaliatory measures, escalating the global trade war.
Trump's harsh tariffs have shaken the decades-old global trade order, sparked fears of recession, and shaved trillions of dollars off the market value of major companies.
Following Trump's tariff announcement last Wednesday, the S&P 500 suffered its biggest loss since the benchmark index's inception in the 1950s. The index is now approaching a bear market, estimated to be 20% below its most recent high.
U.S. government bonds were also caught up in the market turmoil, extending their steep losses Wednesday, a sign that investors are dumping even their safest assets, and the dollar, a traditional safe haven, weakened against other major currencies.
European stock markets fell, and US stock futures predicted more pain, after a dark day for most of Asia.
Japan will cooperate with advanced economies in the Group of Seven (G7) and the International Monetary Fund to help stabilize markets, the country's top monetary diplomat said.
"Cooperation must be international to avoid market instability," Atsushi Mimura told reporters.
Trump has downplayed the market decline and given investors mixed signals about whether the tariffs will remain in place long-term, describing them as "permanent" but also boasting that he is pressuring other leaders to ask for negotiations.
"I'm telling you, these countries are calling us, they're licking our asses," Trump said Tuesday at a Republican Party rally in Washington.
"They're dying to make a deal. 'Please, please, sir, let's make a deal. I'll do anything, I'll do anything, sir,'" Trump said, mockingly imitating a foreign leader.
EUROPE OPPOSES
European Union countries are expected to approve the first countermeasures against Trump's tariffs on Wednesday, joining the counterattack by China and Canada.
The European Commission, which coordinates EU trade policy, has proposed additional tariffs, mostly of 25%, on a range of U.S. imports, from motorcycles, poultry, fruit, timber, clothing, and even dental floss, according to a document seen by Reuters.
They will come into force in stages.
Trump's tariffs are expected to have a bigger impact on eurozone economic growth than initially estimated by the European Central Bank (ECB), although inflation could also be lower in the short term, four sources told Reuters.
The ECB stands ready to ensure the sound financing of the eurozone economy and financial stability, said François Villeroy de Galhau, Governor of the Bank of France and ECB Monetary Policy Chief.
CHINA RESPONDS TO TRUMP
Trump nearly doubled tariffs on Chinese imports, which had been set at 54% last week, in response to Beijing's counter-tariffs.
China will impose tariffs of 84% on US products starting Thursday, up from the 34% previously announced, its Finance Ministry announced Wednesday, in the latest round of the global trade war launched by US President Donald Trump.
According to the State Council Tariff Commission, the U.S. practice of raising tariffs on China "is one mistake after another, seriously violating China's legitimate rights and interests and seriously undermining the rules-based multilateral trading system."
Thus, in accordance with Chinese law, as well as the basic principles of international law, and with the approval of the State Council, starting April 10, "tariff increase measures on imported goods originating in the United States will be adjusted."
In any case, the Chinese Ministry of Finance has urged the United States to immediately correct its erroneous practices, cancel all unilateral tariff measures against China, and properly resolve differences with China through equal dialogue based on mutual respect.
China's currency has faced severe downward pressure, with the yuan trading at record lows internationally due to the tariffs, but sources told Reuters that the central bank has asked major state-owned banks to reduce purchases of U.S. dollars and will not allow the yuan to fall sharply.
The central banks of New Zealand and India cut rates on Wednesday, in what could herald a broader move by monetary policymakers to try to cushion the tariff blow to their economies. Tariffs are another argument for cutting interest rates in Poland, said central banker Ludwik Kotecki.
