U.S. President Trump's comprehensive tariff policy further escalated, intensifying the global trade war on Monday. Trump threatened to increase tariffs on a major Asian country and mentioned that the U.S. would engage in talks with the EU on countermeasures against tariffs. The uncertainty in the global economy caused by these tariff measures led financial markets to plunge once again, with the S&P 500 index hitting its lowest level in more than a year during the day. Global markets fell for the third consecutive day.
Trump stated that these tariffs, which could reach up to 50%, would help revitalize the U.S. industrial base, especially in areas that have shrunk during the process of trade liberalization. He emphasized that this is the only chance for the U.S. economy to readjust, and he is willing to go through this process, despite the short-term pain it might bring.
The EU proposed countermeasures against U.S. tariff policies, including a 25% tariff on American goods such as soybeans, nuts, and sausages. The EU stated that while they are currently taking counteractions, they still hope to negotiate with the U.S. to reach a "zero-for-zero" agreement. Meanwhile, the Trump administration expressed its intention to engage in trade talks with Japan and other Asian countries to avoid the imposition of tariffs as high as 50%.
The volatility in global markets has increased financial market uncertainty. Since Trump's tariff announcement, global stock markets have continued to decline. A report about Trump potentially delaying tariff implementation briefly boosted the U.S. stock market, but the market returned to its downward trend after the White House denied the report. Investors are pessimistic about Trump's so-called "remedy" of tariffs, fearing that they will lead to higher prices, weakened demand, and increased risk of a global economic recession. Goldman Sachs has raised the probability of a U.S. economic recession to 45%.
Trump's tariff policy has left markets confused, making it difficult for investors to determine whether these policies are part of a new norm or a negotiation tactic. With the risk of economic recession rising, the market anticipates the Federal Reserve might cut interest rates in May. However, Trump once again called on Monday for the Fed to take more aggressive measures to cut rates in response to economic downturn pressures.
