IMF warns US tariffs are a ‘significant risk’ for the global economy as markets plummet
The IMF has warned Donald Trump’s sweeping tariffs are dangerous in a time of “sluggish growth” as the US stock markets closed on their worst day since 2020.
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Donald Trump’s trade war poses a “significant risk” to the global economy, according to International Monetary Fund (IMF) boss Kristolina Georgieva.
The IMF’s managing director has warned the US President’s sweeping tariffs pose a danger during a time of “sluggish growth” in a brief statement.
However, Ms Georgieva cautioned against reciprocal levies, even as global leaders meet to discuss options and the EU and China threaten to retaliate.
“It is important to avoid steps that could further harm the world economy. We appeal to the United States and its trading partners to work constructively to resolve trade tensions and reduce uncertainty,” she said.
It comes as all three US stock markets closed on their worse day since 2020, with the Nasdaq tumbling 6 per cent, the S&P 500 down almost 5 per cent and the Dow dropping almost 4 per cent as Apple and Nvidia lost a combined $US470 billion (A$745 billion) by lunchtime.
The tanking stock markets and widespread global criticism has today prompted four Republican senators to vote for the 25 per cent tariff on Canadian products be reversed, marking the first sign of an internal political backlash in Trump’s own party.
This morning, the US President said he was open to tariff negotiations if other countries offered something “phenomenal.”
Asked on Air Force One if he was currently negotiating with trade partners, the president on Thursday said: “Every country has called us.”
He added that’s the “beauty of what we do”, suggesting the tariffs put the US “in the driver seat.”
Asked if he is to deals, the 78-year-old said “it depends if somebody said that we’re going to give you something that’s so phenomenal, as long as they’re giving us something that’s good.”
But Mr Trump’s Commerce Secretary Howard Lutnick told CNN’s “The Situation Room” earlier in the day that tariff deals were unlikely.
“I don’t think there’s any chance ... that President Trump’s going to back off his tariffs. This is the reordering of global trade, right? That’s what’s going to happen.”
It’s still unclear who is the chief architect of the so-called “Liberation Day” tariffs and the formula the Trump administration has used to calculate the steep levies on key allies.
White House sources told the New York Post it remains a “mystery” - however, at this point Trump has advocated for tariffs for more than four decades.
The US President's new position comes as Wall Street stocks plummeted and the EU and China threatened retaliation a day after Donald Trump announced sweeping tariffs that could fuel an all-out trade war and batter economies around the world.
Stocks have lost roughly $US2.7 trillion in market value Thursday, on track for their largest decline since March 2020.
The Dow Jones Industrial Average plunged 1,679, or 4 per cent, to end its worst session since the Covid pandemic hit the country in 2020.
The S&P 500 plummeted 4.84 per cent and the Nasdaq nosedived nearly 6 per cent after Trump revealed at least 10 per cent tariffs on all imports, and much harsher rates on dozens of countries after the markets closed on Wednesday.
“This was the worst-case scenario for tariffs and were not priced into the markets, which is why we are seeing such a risk-off reaction,” Mary Ann Bartels, chief investment strategist at Sanctuary Wealth, said.
“We’re expecting rocky markets for the next few months, and through the end of the first half of the year.”
Mr Trump brushed off concerns when he was questioned about the impact by reporters on the White House front lawn.
“I think it’s going very well,” Mr Trump said.
“The markets are going to boom, the stocks are going to boom.”
In a note to investors, JP Morgan said that if Mr Trump maintained the massive tariffs he announced, his unprecedented trade policies could cause the US and global economies to both fall into a recession in 2025.
In an early post to Truth Social, Mr Trump said the US economy would emerge “far stronger,” even as world markets tumbled.
“THE OPERATION IS OVER! THE PATIENT LIVED, AND IS HEALING. THE PROGNOSIS IS THAT THE PATIENT WILL BE FAR STRONGER, BIGGER, BETTER, AND MORE RESILIENT THAN EVER BEFORE,” he wrote.
During an appearance on Fox News, Vice President JD Vance said he isn’t going to “shy away” from the short-term pain the tariffs could cause Americans, but insisted the US needed a “big change.”
Nearly $300 billion (A$470 billion) has been wiped off Apple’s value on Thursday local time, amid the stock market turmoil.
Companies with China-reliant supply chains saw significant losses.
Major tech stocks fell in an overall sell-off, with Nvidia plunging 5.9 per cent, Tesla falling 5.9 per cent and Amazon dropping 7.2 per cent.
Sneaker companies like Nike, Adidas and Puma — many of which lean on Vietnam for production capacity — also tumbled. Nike suffered the largest loss, with its shares falling 13.7 per cent.
As Mr Trump’s tariff plan rattled markets, the US Dollar Index slumped 2.1 per cent as the euro gained 2.4 per cent, on track for its biggest daily jump since 2015.
Mr Trump said he would impose a 10 per cent baseline tariff on all imports to the US and higher targeted duties on some of the country’s biggest trading partners, hammering goods from Italian coffee and Japanese whisky to sportswear made in Asia.
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FRANCE RETALIATES AGAINST ‘BRUTAL AND UNFOUNDED’ TARIFFS
French president Emmanuel Macron has called for a freeze on investment in the US as a response to Mr Trump’s “brutal and unfounded” tariffs.
“Future investments, investments announced in the last weeks, should be suspended for a time for as long as the situation with the United States is not clarified,” Mr Macron said at a meeting with some of France’s biggest companies.
Mr Macron also suggested France could retaliate in the technology space “where the United States benefits enormously from Europe.”
“Nothing is excluded. All the elements are on the table.”
French Prime Minister, François Bayrou, said the global tariffs had created “an immense difficulty for Europe” and were “a catastrophe for the United States and for US citizens.”
SPAIN AND GERMANY SEETHING AT TARIFFS
Spanish Prime Minister Pedro Sánchez labelled the tariffs “protectionist” and said they ran “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” impacted.
“It goes against everyone and everything,” he said adding the measures were “unprecedented” and a “unilateral” attack on Europe.
“Returning to the protectionism of the 19th century isn’t a smart way of tackling the challenges of the 21st century.”
German chancellor Olaf Scholz said the tariffs are “fundamentally wrong” and “an attack on a trade system that has created prosperity all round the world, itself an American achievement”.
TARIFFS AN UNEXPECTED BOON FOR COSTA RICA
While many countries are bracing for significant economic pain from the tariffs, Costa Rica is anticipating the situation will play out in their favour.
Like Australia, Costa Rica is only being subjected to a 10 per cent tariff.
As a major exporter of coffee to the US, it’s a small price to pay compared to their competitors in Vietnam who are being slugged 46 per cent and Nicaragua who will have to pay 18 per cent.
“While it is premature to foresee the effects of this measure, it is clear that there will be adjustments in the commercial environment for our product. For example, there are producing countries that will now have a higher tariff than ours and this may even open up opportunities,” a statement from Costa Rica’s Coffee Institute reads.
CANADA FIRES BACK AT TRUMP TARIFFS
Canada will hit the US with a reciprocal 25 per cent tariff on all imported vehicles, Prime Minister Mark Carney announced on Thursday local time — as he called Mr Trump’s tariffs a “tragedy” for global trade.
Mr Carney said the tariff’s will target all vehicles that are not compliant with the US-Mexico-Canada trade deals, assuring Mexico that the new tariff’s will not apply to the southern nation.
The prime minister touted that the blow should steer America clear of its protectionist policies, but contended that the trade war may only just be getting started.
“Given the prospective damage to their own people, the American administration should eventually change course,” Mr Carney said. “But I don’t want to give false hope.”
Mr Trump brought a shock to the world economy when he announced sweeping 10 per cent tariffs on nearly all imported goods, including those from key allies such as members of the European Union, Australia, Japan and Israel.
Canada and Mexico, however, were spared from the baseline tariff and reciprocal levies, including a 25 per cent tariffs levied on foreign auto imports, for now.
Canada and Mexico harbour many production plants for American carmakers, which have allowed companies to save on costs as they provide the bulk of vehicles to the US.
EU, CHINA WARN OF RETALIATION
China — which was slapped with a 54 per cent rate including earlier tariffs — urged the US to immediately backtrack on the trade policy and vowed to protect its own interests.
“China firmly opposes this,” Beijing’s commerce ministry said in a statement. “There are no winners in trade wars, and there is no way out for protectionism.”
European Union chief Ursula von der Leyen said the 27-member bloc feels “let down by our oldest ally” and that the EU is “prepared to respond.”
She called Mr Trump’s tariffs a “major blow” that will lead to higher bills and stoke inflation worldwide.
“The consequences will be dire for millions of people,” she said.
The White House did not immediately respond to a request for comment.
Trump has no public events scheduled before he departs Washington for a golf tournament at one of his Florida resorts.
Treasury Secretary Scott Bessent had urged countries not to react with kneejerk retaliation shortly after Mr Trump made his “Liberation Day” announcement from the Rose Garden on Wednesday local time.
“Everybody, sit back, take a deep breath, don’t immediately retaliate. Let’s see where this goes because if you retaliate, that’s how we get escalation,” Mr Bessent told CNN.
Though Mr Trump’s 10 per cent baseline tax is set to take effect after midnight on Saturday eastern US time, specific reciprocal tariffs above that rate won’t take hold until April 9.
That leaves nations some room to negotiate, so the final tariff rates could end up a lot lower, according to analysts.
“Over the coming 24 hours, the world will quickly realise these tariff rates will never stay as they are shown, otherwise it would be a self-inflicted Economic Armageddon,” Wedbush analyst Dan Ives said.
“We have to assume this is the start of a negotiation and these rates will not hold.
“But the initial tariff rates that Trump showed off on a poster board at Wednesday’s announcement are “illogical and absurd,” Mr Ives continued.
Canada will hit the US with a reciprocal 25% tariff on all imported vehicles, Prime Minister Mark Carney announced Thursday — as he called President Trump’s Liberation Day tariffs a “tragedy” for global trade.
Carney said the tariff’s will target all vehicles that are not compliant with the US-Mexico-Canada trade deals, assuring Mexico that the new tariff’s will not apply to the southern nation.
The prime minister touted that the blow should steer America clear of its protectionist policies, but contended that the trade war may only just be getting started.
APPLE TAKES A MASSIVE HIT
Nearly $300 billion (A$470 billion) has been wiped off Apple’s value, amid the stock market turmoil.
Apple’s shares are currently down 9 per cent, which by my maths cuts its market capitalisation to around $3.07 billion, down from $3.367 billion on Wednesday night local time last night.
Apple will be hurt by the new US tariffs on imports from China, Taiwan, India and Vietnam, as much of its manufacturing and supply chain is based in the Asia-Pacific region.
Ben Barringer, global technology analyst at Quilter Cheviot, told clients: “Apple makes 90 per cent of its products in China, with 10 per cent in other Asian countries such as Vietnam and India. These countries are facing the harshest tariffs, so we can expect iPhones and Apple Watches to go up in price, while hitting the profits of the company significantly. Switching production to the US is neither easy, nor cheap.
The tariffs are also likely to create demand destruction, which means cutbacks on software and cloud spending. Alphabet, will see a double whammy with digital advertising also cut back on in a tougher economic environment – with Meta also being hit in this regard.
FTSE 100’s WORST DAY SINCE AUGUST
Meanwhile, Britain’s stock market has recorded its biggest one-day fall in eight months, as fears over Mr Trump’s escalating trade war triggered a wave of selling.
The FTSE 100 index of blue-chip shares has closed after a day of heavy losses, down 133 points or 1.5 per cent at 8,474 points.
That’s its biggest daily drop since early August last year, when markets were tumbling on fears of a US recession.
Bank stocks led the fallers, with Standard Chartered down 13 per cent, HSBC falling 8.8 per cent and Barclays losing 8.7 per cent.
Miners were also hit, by fears that a global downturn would hurt demand for commodities such as iron ore, copper and coal.
‘STRONGER, BIGGER, BETTER’: TRUMP DOUBLES DOWN
It comes as Mr Trump acknowledged the shock brought by his tariffs onslaught, but said the US economy would emerge “far stronger,” even as world markets tumbled.
“THE OPERATION IS OVER! THE PATIENT LIVED, AND IS HEALING. THE PROGNOSIS IS THAT THE PATIENT WILL BE FAR STRONGER, BIGGER, BETTER, AND MORE RESILIENT THAN EVER BEFORE,” Mr Trump posted on his Truth Social platform just before Wall Street opened for trading and stocks plummeted.
White House Press Secretary Karoline Leavitt also tried to reassure US markets, telling CNN: “To anyone on Wall Street this morning, I would say, ‘Trust in President Trump.’ This is a president who is doubling down on his proven economic formula.”
She said the tariffs — which include 10 per cent across the board levies on imports and far steeper barriers on dozens of specific countries, including the top US trading partners — meant “the United States is no longer going to be cheated by foreign nations.”
Ms Leavitt appeared to rule out the possibility of Mr Trump pulling back any of the tariffs before they are implemented over the coming weekend.
“The president made it clear yesterday this is not a negotiation,” she said. “He’s always willing to pick up the phone to answer calls, but he laid out the case yesterday for why we are doing it,” she said.
“These countries around the world have had 70 years to do the right thing by the American people and they have chosen not to. They have ripped off American workers. They have taken our jobs overseas. The president is putting an end to that yesterday.”
US Commerce Secretary Howard Lutnick doubled down on Ms Leavitt’s comments, saying there is no chance the US President will back off his tariffs.
In a blow to hopes that Mr Trump could be intimidated into reversing course, Mr Lutnick told CNN: “The president is not going to back off what he announced yesterday. He is not going to back off.”
– with AFP
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Originally published as IMF warns US tariffs are a ‘significant risk’ for the global economy as markets plummet
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