Global stock markets plunge as Donald Trump defends tariffs

Stocks across the board were sinking to new lows after Mr Trump said 'sometimes you have to take medicine to fix something'

Stock markets plunged overnight in Asia and investors are braced for further sharp falls in New York. Photographer: Michael Nagle/Bloomberg

Global shares plunged on Monday as investors grappled with the possibility of a recession after US President Donald Trump showed no signs of letting up in his aggressive trade war.

The pan-European STOXX 600 slumped 4.2%, down for the fourth straight session and on track for its steepest one-day percentage decline since the covid-19 pandemic.

In the US, the S&P 500 and Dow Jones indexes fell almost 4% on opening and have remained volatile.

Trade-sensitive Germany's benchmark index fell sharply in morning trade before recovering to end  down3.85%, among the worst hit markets in the euro area. At one point the index was down more than 20% from its March all-time closing high. 

In Dublin, the ISEQ All Share index ended Monday, down 4.1% with all major company share prices falling, including AIB down 1.4%, Bank of Ireland down 2.2%, Ryanair down 3.7%, and Kerry Group falling 4.7%.

Over the weekend, Trump told reporters that investors would have to take their medicine and he would not do a deal with China until the US trade deficit was sorted out, sparking a fresh wave of selling in Asian markets.

Cryptocurrencies wiped out almost all their gains since Trump’s election win in early November as fallout from the tariff onslaught sparked heavy selling. Bitcoin tumbled below $75,000 on Monday for the first time since November 7 before recovering over the day to below $80,000. The total market capitalisation of all cryptocurrencies fell about 11% to $2.5tr.

European Union countries are weighing approval of a first set of targeted countermeasures on up to $28bn (€25.5bn) of US imports in the coming days. The 27-nation bloc faces 25% import tariffs on steel and aluminium and cars and "reciprocal" tariffs of 20% from Wednesday for almost all other goods.

The European Central Bank has estimated that a blanket US tariff would lower euro zone growth by 0.3 percentage points in the first year. EU counter-tariffs on the US would raise the damage to half a percentage point.

Markets also plunged overnight in Asia as the fallout’s enters its second week.

In Japan, the Nikkei 225 index, which tracks the country’s top 225 listed companies, plummeted by about 6.5% on Monday morning.

The index was close to dropping below its lowest level since August last year.

China’s Shanghai Composite, which tracks the movement of shares on the country’s main stock exchange, had dropped more than 8%, while Hong Kong’s Hang Seng index was plunging by more than 12%.

Mr Trump, who spent the weekend in Florida playing golf, unveiled a range of tariffs on countries around the world last week, including a 10% “baseline” rate on all the US’s trading partners which came into effect on Saturday.

In a new research note, a group of analysts for Deutsche Bank said the “markets are still reeling from the announcement of US reciprocal tariffs last Wednesday, which has seen investors price in a growing probability of a US recession”.

“Looking to the week ahead, tariffs are clearly set to dominate the agenda, but the big question is also how other countries might retaliate.

“That’s something markets are watching for closely, as it was China’s retaliation that led to the fresh sell-off on Friday.”

China’s reciprocal 34% tariff on US exports to China are set to come into force on Thursday.

Additional reporting Reuters and PA