‘Can’t ignore’: World economy in meltdown

Stock markets around the world have been spooked by what’s happening in America.

Stock markets around the world have taken a major hit as China, Mexico and Canada hit back at US tariffs and fears grow that Europe could be President Donald Trump’s next target in the growing global trade war.

Mr Trump 25 per cent tariffs on Mexican and Canadian imports went into effect just after midnight on Tuesday. The President also doubled the 10 per cent tariff he slapped on Chinese imports last month to 20 per cent.

Australia is also poised to cop Mr Trump’s sweeping 25 per cent tariffs on steel and aluminium.

ASX futures swung wildly in the US session, before finishing down 1 per cent suggesting the sharemarket will extend losses on Wednesday.

Wall Street stocks tumbled for a second straight session while European markets closed down sharply amid worries a prolonged trade spat may knock the world economy out of kilter.

Frankfurt plunged more than 3.5 per cent for its worst session in almost three years, while London shed 1.3 per cent and Paris gave up 1.9 per cent.

The President’s 25 per cent tariffs on Mexican and Canadian imports went into effect just after midnight on Tuesday. Picture: Jim Watson/AFP

“The headlines surrounding an impending global trade war have become too loud to ignore on the once-booming trading floor of Frankfurt,” noted Konstantin Oldenburger, analyst at CMC Markets.

“The sounds of trade disruptions are growing louder and are becoming increasingly difficult to ignore, even though Trump has yet to impose any direct tariffs against Germany or the European Union.”

Of the 11 industrial sectors in the S&P 500, a major US market index, 10 finished in negative territory, with technology flat.

The biggest losers in the Dow included Boeing, which slid 6.6 per cent, 3M, which dropped nearly five per cent and American Express, which sank 4.1 per cent.

“The longer the tariffs last or are in effect, the longer that this market will decline,” Sam Stovall of CFRA Research said.

Wall Street stocks tumbled for a second straight session. Picture: Timothy A. Clary/AFP

“Investors are worried that we are headed for a recession and a bear market.” US tariffs of 25 per cent for Canadian and Mexican goods came into effect on Tuesday along with the doubling of levies on Chinese imports to 20 per cent. The three countries announced retaliatory moves.

“The US administration is continuing to cause even more global upheaval and overnight by far the broadest set of tariffs yet has come into effect,” said Deutsche Bank analyst Jim Reid.

But Reid added “there is still some market doubt as to whether all these tariffs will persist for a prolonged period of time.” The European Union warned that the tariffs on Canada and Mexico risk “disrupting global trade,” and urged Washington to reverse course.

“These tariffs threaten deeply integrated supply chains, investment flows, and economic stability across the Atlantic,” said EU trade spokesman Olof Gill.

Amid fears the EU will be the next target, French Economy Minister Eric Lombard insisted that the bloc would be tough in negotiations.

“We have negotiators who are playing hardball, we will play hardball but … we need to reach a balanced deal to protect our economies,” Lombard said.