World markets slide as Trump tariffs fan trade war fears

(Reuters) - World markets were left reeling on Thursday after U.S. President Donald Trump unveiled reciprocal tariffs to match duties put on U.S. goods by other countries.

Stock markets tumbled and investors dashed to the relative safety of bonds, gold and the yen. S&P 500 futures EScv1 dropped 3%, suggesting investors expect deep losses when Wall Street opens later in the day.

U.S. Treasury yields US2YT=RR slid, while China's yuan CNH= dropped to a seven-week low.

Click here for a factbox on reciprocal tariffs.

COMMENTS:

JESSICA HENRY, INVESTMENT DIRECTOR FOR EQUITIES, FEDERATED HERMES LIMITED, LONDON:

"While Trump’s tariff announcements provided European markets with some degree of clarity, a key concern is that tariff uncertainty continues with retaliatory tariffs from the EU, UK and other regions expected to unfold in the coming days, and further announcements likely to be made from the U.S.."

"Prolonged uncertainty will likely cause ripple effects through global markets, further eroding investor confidence which has dwindled of late, particularly in relation to the Magnificent Seven."

DOMINIC BUNNING, HEAD OF G10 FX STRATEGY, NOMURA, LONDON:

"I think that the negative growth shock this seems to be implying for the U.S. is going to keep weighing on the dollar as investors think about whether to continue with the U.S. exceptionalism theme."

"There have been sizable flows from Europe to the U.S. (of around 500 billion euros in the last 12 months, according to the US TIC data) which could reverse to some extent."

"Obviously we need to see whether there are more tit-for-tat tariffs and retaliation, but the overarching theme to me is that European growth expectations have been basing, while U.S. expectations have rolled over and have further to run which can weigh on the USD against G10 FX in general."

JUSTIN ONUEKWUSI, CIO, ST JAMES'S PLACE, LONDON:

"Whilst still uncertain, we will likely see retaliation from Europe but it's clear countries will think about how to retaliate in a politically astute way."

"Significant retaliation could lead to a tariff 'spiral of doom' that could be the growth shock that drags us into recession."

"Germany has its biggest fiscal expansion since reunification but exporters and industrials in particular will be challenged buy U.S. tariffs."

"Still European equities are cheap and there is more significantly more upside."

"We have raised global recession risks to 35% from 15%."

"The volatility in markets, is likely to create opportunities for investors that are willing to be patient."

FREDERIQUE CARRIER, HEAD OF INVESTMENT STRATEGY, RBC WEALTH MANAGEMENT, LONDON:

"The U.S. tariffs on the UK are less severe than those imposed on Europe, at 10%, a welcome relief to the UK government. However, the UK was not spared the 25% tariff imposed on all foreign autos, which will disappoint. The strategy to hold quiet negotiations ahead of the announcement doesn’t seem to have paid off so far."

"The tariffs serve as a stark reminder that the highly sought after free trade agreement with the US – once a key goal of the Brexit agenda – remains out of reach."

KASPER ELMGREEN, CIO OF FIXED INCOME AND EQUITIES, NORDEA ASSET MANAGEMENT, COPENHAGEN:

"These tariffs are worse than expected, as shown by equities trading significantly down and gold and bonds trading up. Clearly, the reading here is that the recession risk is on the rise. This is a very clear signal, if anyone should be uncertain that globalisation has reversed, this is the signifier. We were in a period of high policy uncertainty, this is also why the initial excitement after the election abated so much. This announcement does not reduce uncertainty, but it is just step one in a process. We should expect now to see countermeasures and retaliations."

"One potential positive outcome is this is a shock to the system and it stabilises, this is a negotiation, a tactic to reset what is seen as an unfair system. That could create some kind of certainty. The negative view is that this does not create any certainty and there is a prolonged period of negotiations, hitting growth."

MAARTJE WIJFFELAARS, SENIOR ECONOMIST AT RABOBANK, EINDHOVEN:

"The tariffs on EU goods soften EU growth and raises EU inflation somewhat, but won’t to push the EU in a recession.

What is important for the EU outlook is what will happen due to the broadscale tariffs with overall US demand, global demand and supply chains, how the EU will respond, and obviously investment decisions.

The latter are likely to be delayed due to the uncertainty, but the extent to which is impossible to predict. We know from previous crises episodes that investments can shrink quickly – and the same goes for recovery by the way."

LYNN SONG, CHIEF ECONOMIST FOR GREATER CHINA, ING, HONG KONG

"The tariff hike was larger than what most market participants were expecting, so the initial market is likely going to be a continuation of risk off sentiment, reflecting weaker growth expectations on a macro level as well as the individually impacted companies on a micro level.

"However, lost in the initial panic are several key things to consider. First, the U.S. has signalled that these reciprocal tariffs will mark a cap unless countries choose to retaliate, and they appear to be encouraging countries to come and negotiate to lower the rates. Second, a broad based global tariff means that substitution products are less available.

"It feels like this time around US importers could end up bearing more of the burden from tariffs rather than expecting exporters to make up for the gap by cutting margins.

RODRIGO CATRIL, SENIOR CURRENCY STRATEGIST, NATIONAL AUSTRALIA BANK, SYDNEY

"When you look at the tariff announcement, it's certainly bigger and larger than the base case for many, or most, so it's not surprising to see how the kiwi and the Aussie are the ones underperforming today, reflecting their pro-growth sensitivity, and of course an increase in tariffs does mean lower trade and lower global growth.

"For the euro, it's an interesting one in the sense that it's showing some resilience, and that's probably related to the fact that Europe appears to be more focused on supporting its economy from the impact from U.S. tariffs, rather than looking to retaliate as a first initiative. So I think the market has liked that approach of calmness and measuredness from Europe."

WANG ZHUO, PARTNER, ZHOUZHU INVESTMENT, SHANGHAI

"Trump's new tariff measures are undoubtedly unwise, as fair trade is not realized through so-called reciprocal taxes, but is determined by comparative advantage.

"The higher tariffs will dent U.S. efforts to reduce inflation, so it's possible the U.S. will witness stagflation. The slump in U.S. stocks is a sign that investors are voting with their feet.

"The Chinese market is fully prepared psychologically, so is resilient. What's more import for China now, is to pay attention to domestic macro policies and data, and see when our CPI data can improve and whether it's sustainable."

NIGEL GREEN, CEO, DEVERE GROUP, DUBAI, UAE

“This is how you sabotage the world's economic engine while claiming to supercharge it. It's a seismic day for global trade.

"Tariffs are taxes, plain and simple, and American consumers will bear the brunt. When businesses don’t know what trade will look like next quarter, they stop hiring, stop investing, and freeze plans. That ripples through to consumers. This chilling effect is how recessions begin.

"The dollar’s dominance is also no longer a sure thing. America’s credibility is on the line. With the dollar as the global reserve currency, any whiff of unpredictability or politicized policy makes global investors nervous. That trust is hard-earned and easily lost.”

SCOTT WREN, SENIOR GLOBAL MARKET STRATEGIST, WELLS FARGO INVESTMENT INSTITUTE, ST LOUIS, MISSOURI

"I am a little surprised that it's a little less than what we thought potentially.

"We’ve wanted to be invested in the U.S. relative to international and that’s not going to change. We like large cap... Now we're also overweight midcaps… On this pullback here, our outlook is not wildly positive but it’s positive. So we're trying to gain some cyclical exposure here. We're not trying to hide. We don’t want to get defensive. We want to take advantage of stock pullbacks to buy stocks and play what we perceive to be a better second half.”

(Compiled by the Global Finance & Markets Breaking News team; Editing by Lincoln Feast, Dhara Ranasinghe and Amanda Cooper.)