Trump tariffs trigger recessionary fears

General market commentary

Global equity markets endured their sharpest one-day declines since 2020 after President Trump’s unexpected announcement of sweeping new tariffs on nearly all U.S. imports, sparking fears of a full-scale trade war. The S&P 500 slumped 4.8%, the Dow shed 4%, and the Nasdaq tumbled 6%, with technology shares bearing the brunt of the sell-off. Apple, Amazon, and Nvidia all fell heavily, reflecting the sector’s deep reliance on global supply chains. Retailers were also hit hard, with shares in Nike and Ralph Lauren tumbling over 14%, following new duties on goods from major manufacturing hubs in Asia. The financial sector saw notable losses too, with Citigroup’s shares falling more than 12%. Meanwhile, consumer staples provided a rare bright spot, as investors rotated into traditionally defensive equities.

The sheer scale of the tariff package – lifting the effective rate on all U.S. imports to nearly 25% – caught many market participants off guard. While the aim is to boost domestic industry and reduce trade deficits, the broader economic consequences are troubling. Tariffs function in practice as a tax on consumers and businesses, which is likely to depress consumption and curtail investment. Economists suggest the net result could be a 2.4% hit to GDP and a 1.4% rise in prices, increasing concerns about stagflation. Though the U.S. is less reliant on exports than many of its trading partners, retaliatory tariffs from China and the European Union are expected to follow. Investors are responding to the uncertainty by selling off equities in sectors seen as most vulnerable, particularly those dependent on imported inputs or overseas sales.

Looking ahead, markets will remain volatile until there is more clarity on the duration and scope of the new trade measures. Countries such as India, South Korea, and Mexico have indicated they may seek exemptions or negotiate concessions ahead of the 9 April implementation date. There is also speculation that the Federal Reserve could intervene with further rate cuts to counteract weakening growth. Not all sectors are equally exposed: technology, industrials, and consumer discretionary equities are more at risk due to their reliance on global trade, while sectors such as utilities, real estate, and financials are relatively insulated. For investors, diversification remains key. Those with balanced portfolios – including international equities and bonds – have weathered the downturn better than those with concentrated exposure to U.S. large-caps. Remaining disciplined and focused on long-term investment goals is critical in navigating what is likely to be a turbulent period for global markets.

Latest market and economic update

Asian equities extended sharp declines on Friday, led by Japan’s Nikkei 225 and Australia’s ASX 200, both hitting eight-month lows amid mounting fears of a global recession triggered by U.S. trade tariffs. Losses were widespread across the region, with South Korea’s KOSPI falling 1.5% following the impeachment of President Yoon, while thin holiday trading in China, Hong Kong, Taiwan, and Indonesia contributed to subdued volumes.

U.S. equity futures steadied overnight as investor sentiment was tempered by President Trump’s signal of openness to trade negotiations following heightened concerns over sweeping new tariffs.

European equity markets fell sharply on Thursday, with the Stoxx 50 dropping 3.7% and the Stoxx 600 losing 2.7%, as higher-than-expected tariffs imposed by President Trump rattled global supply chains. Companies such as Adidas, Maersk, and auto shares were hit hard, while utilities outperformed as investors sought safer assets amid escalating trade tensions.

The US 10-year Treasury yield fell below 4% on Friday, hitting a six-month low as investors sought safety amid mounting fears that President Trump’s aggressive tariff measures could tip the global economy into recession. The bond market rallied sharply, with traders now pricing in four Federal Reserve rate cuts this year in response to the expected slowdown in growth and rising trade uncertainty.

The US dollar index remained under pressure, holding below 102 after a sharp near-2% drop in the previous session, as investors reacted to escalating trade tensions and fears of a global slowdown. With markets now pricing in multiple Federal Reserve rate cuts this year, the dollar weakened further against major currencies, sending the euro to 1.1089.

Oil prices extended their losses in Asian trading, with both Brent and WTI crude falling further amid concerns over an OPEC+ decision to accelerate output increases and the impact of President Trump’s new tariffs. Investors are worried that higher supply, coupled with recession fears from global trade tensions, could dampen demand, further pressuring prices.

Equities on the move

The following companies experienced moves in their share price driven by analyst ratings, quarterly earnings, or other news:

Intel and Taiwan Semiconductor Manufacturing Co reached a preliminary agreement to form a joint venture, with TSMC taking a 20% stake, to address Intel's ongoing challenges in chip manufacturing. The deal comes as the White House and Commerce Department push for solutions to revive Intel, which has faced significant losses and missed out on the AI-driven semiconductor boom.

AppLovin has submitted a preliminary bid for TikTok's assets outside of China, as the deadline for finding a non-Chinese buyer approaches. The bidding race for the short video app intensifies, with Amazon and a consortium led by OnlyFans founder Tim Stokely also entering the fray, while regulatory and geopolitical concerns remain key challenges for potential buyers.

Thales plans to hire 8,000 people in 2025 as part of its strategy to strengthen growth in its aerospace and defence sectors. The new recruits will be spread across several regions, with France and the U.K. receiving half of the hires, including 40% for engineering roles and 25% for industrial positions.

Microsoft has scaled back or delayed several data centre projects globally, including in Indonesia, the UK, Australia, and the US, raising concerns about future AI and cloud services demand. The company has acknowledged revisions to its data centre plans, with some projects put on hold or exited, reflecting a more cautious approach to infrastructure investment amid uncertainties in AI spending.

HSBC downgraded Nvidia to "Hold" from "Buy," citing limited near-term upside as the company transitions towards new AI opportunities in robotics and autonomous vehicles. The brokerage also reduced its price target to $120 from $175, lowering earnings estimates and highlighting weakening GPU pricing and supply chain challenges.

Jefferies analysts caution that proposed U.S. tariffs on Chinese imports could reduce Apple’s net profit by 14% in fiscal 2025 if the company is not exempted, with the firm expecting Apple to accelerate its supply chain diversification. Similarly, Rosenblatt warns that Trump’s new tariffs could cost Apple $39.5 billion, leading to a potential 32% reduction in operating profit, while noting that price hikes to offset the tariffs could depress demand and increase competition from Samsung.

Goodyear Tire & Rubber Co shares rose 11.7% as analysts highlighted the company's strong US manufacturing presence and focus on higher-margin replacement tires, which could shield it from the impact of President Trump's reciprocal tariffs. Deutsche Bank upgraded Goodyear, noting its strategic shift towards premium products and reduced exposure to low-cost imports, maintaining a "Buy" rating with a price target of $13.

Wolfe Research upgraded U.S. Bancorp to "Outperform," citing an attractive valuation and expected improvements in operating performance under new CEO Gunjan Kedia. The firm raised its 2025-2026 earnings estimates, setting a year-end target price of $49, anticipating a 14% upside.

Morgan Stanley upgraded Block Inc to "Overweight," citing its low valuation and potential for cost savings, with a raised price target of $67. The bank is optimistic about Square Seller's growth despite macroeconomic risks, expecting improved payment volume growth and profitability due to recent headcount reductions and stable spending trends among small businesses.

Bank of America downgraded Lyft to Underperform from Buy, citing increased competition from autonomous vehicle companies like Waymo and Tesla, which could pressure its market share. The firm lowered its FY25 EBITDA forecast and price target, highlighting risks from Lyft's exposure to California and ongoing pricing challenges.

PDD Holdings faces significant challenges following the US tariff announcements, with its international e-commerce platform, Temu, expected to be most impacted by the removal of the de minimis exemption for shipments under $800. Citi analysts predict that Temu’s business model will face substantial uncertainty, while Chinese companies focused primarily on domestic markets, such as JD.com and Meituan, may be more resilient to the new tariffs.

Upcoming data and events

The U.S. jobs report and a speech from Federal Reserve Chair Jerome Powell are due today, with both events expected to influence market expectations and monetary policy outlook.

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