Markets around the world experienced renewed volatility on Monday amid growing anticipation of a sweeping US tariff announcement. The move, expected to take effect on Wednesday, has already caused notable drops in European and American stock indices, as financial markets brace for a potential escalation in global trade tensions.
Dubbed “Liberation Day” by Donald Trump, the midweek deadline is poised to introduce a series of tariffs targeting individual trade partners. The US administration says the measure is designed to revitalize domestic manufacturing, but investors fear widespread consequences for global growth, inflation, and consumer costs.
European Indices Hit as Investors React to Trade Uncertainty
Stock markets in the UK and Europe declined sharply at the start of the week, reflecting investor concern over the potential scope of the incoming tariffs.
According to market data, London’s FTSE 100 dropped more than 1% on Monday, with the index shedding around 100 points during morning trading. In continental Europe, Germany’s DAX and France’s CAC 40 both fell by over 1.7%.
The downturn followed Friday’s losses on Wall Street, where the S&P 500 and Dow Jones Industrial Average slipped by 2% and 1.7%, respectively. Analysts attribute the slump to heightened uncertainty over the direction of US trade policy, as well as fears of a retaliatory response from key trading partners.
The White House has already imposed tariffs on aluminium, steel and automotive imports, along with elevated duties on goods from China, Canada, and Mexico. These measures are part of a broader effort to address what the administration describes as “unfair trade practices”.
While intended to stimulate US production, the tariffs are also expected to impact exporters across Europe, with UK luxury carmakers such as Rolls-Royce and Aston Martin identified among the potential casualties.
Broader Economic Concerns Surface Amid Policy Uncertainty
Beyond market movements, economists have raised concerns about the wider implications of Trump’s trade strategy. According to the OECD, the policies are likely to act as a “drag on global activity” and reduce living standards, especially in the US where tariffs function as indirect taxes on domestic businesses.
In its recent outlook, the organisation estimated a decline of $1,600 in real disposable income per US household.
The analysis suggested that “consumers face much of the burden of higher tariffs,” undermining purchasing power and confidence.
In the UK, the effect remains uncertain. About 18% of British car exports are destined for the US, making the sector vulnerable. While negotiations are ongoing, with Sir Keir Starmer seeking exemptions, Bank of England economists warn that the impact on inflation will depend on how other nations respond and on future currency fluctuations.
Swati Dhingra, a member of the Monetary Policy Committee, acknowledged the UK’s sensitivity to import prices, but noted that key exports like refined oil may be less affected. The Bank has confirmed it is monitoring the situation closely as it evolves.
