Global Financial Markets Hit Hard by US Tariff Increases
Investor panic ensues as financial markets worldwide face substantial losses following new tariffs announced by the US.
The recent announcement of increased tariffs by President Donald Trump in early April has triggered widespread panic among investors, resulting in financial markets around the world losing thousands of billions of dollars from April 2 to April 7, according to the latest report from the Macroeconomic Analysis and Trends bulletin.
During this period, stock markets experienced a significant decline, fueled by fears of a sharp global economic slowdown that also impacted commodity markets, notably causing crude oil prices to fall by approximately 14 percent cumulatively, reaching their lowest levels in nearly four years.
In an authorial piece by economist Goran Nikolić, it is highlighted that companies are basing their medium- to long-term business plans on expectations of future actions from economic policymakers, which he describes as a challenging task under the current circumstances.
Nikolić notes that a potential positive outcome for the White House is that the ongoing uncertainty may compel many countries to reach agreements with Washington regarding American tariffs.
In Brussels, it is estimated that the reciprocal tariffs of 20 percent, along with previously introduced tariffs of 25 percent on automobiles, steel, and aluminum, could impact approximately 70 percent, or up to 380 billion euros, of EU exports to the US. Nikolić estimates that if trade levels remain unchanged, Washington could collect 81 billion euros in tariff revenues compared to seven billion euros in 2024. However, he posits that the logical economic effects of tariffs would likely lead to a reduction in mutual trade.
Additionally, an analysis by the European Central Bank (ECB) suggests that US tariffs on European imports, coupled with the EU's retaliatory measures and a subsequently weakened euro, could reduce the growth of GDP in the Eurozone by about half a percentage point.
This would represent a substantial decline from the already modest expected GDP increase of 1.1 percent.
Nikolić further notes that monetary policy is easing, indicating a potential return of real rates to zero in the Eurozone, which could further stimulate credit growth.
Estimates suggest that reciprocal tariffs could result in economic damage to the EU amounting to as much as 750 billion euros during Trump's administration, with resultant fears of deflation likely leading to an interest rate cut by the ECB as early as this month and three additional cuts by the end of the year.
He emphasizes that the new administration in the White House views American military and economic dominance as a critical tool to maintain or enhance the US's power in the global hierarchy.
A shift in US foreign policy could result in a departure from the support for free trade, which has also encompassed the protection of global maritime routes, a policy observed since the end of World War II.
During this period, stock markets experienced a significant decline, fueled by fears of a sharp global economic slowdown that also impacted commodity markets, notably causing crude oil prices to fall by approximately 14 percent cumulatively, reaching their lowest levels in nearly four years.
In an authorial piece by economist Goran Nikolić, it is highlighted that companies are basing their medium- to long-term business plans on expectations of future actions from economic policymakers, which he describes as a challenging task under the current circumstances.
Nikolić notes that a potential positive outcome for the White House is that the ongoing uncertainty may compel many countries to reach agreements with Washington regarding American tariffs.
In Brussels, it is estimated that the reciprocal tariffs of 20 percent, along with previously introduced tariffs of 25 percent on automobiles, steel, and aluminum, could impact approximately 70 percent, or up to 380 billion euros, of EU exports to the US. Nikolić estimates that if trade levels remain unchanged, Washington could collect 81 billion euros in tariff revenues compared to seven billion euros in 2024. However, he posits that the logical economic effects of tariffs would likely lead to a reduction in mutual trade.
Additionally, an analysis by the European Central Bank (ECB) suggests that US tariffs on European imports, coupled with the EU's retaliatory measures and a subsequently weakened euro, could reduce the growth of GDP in the Eurozone by about half a percentage point.
This would represent a substantial decline from the already modest expected GDP increase of 1.1 percent.
Nikolić further notes that monetary policy is easing, indicating a potential return of real rates to zero in the Eurozone, which could further stimulate credit growth.
Estimates suggest that reciprocal tariffs could result in economic damage to the EU amounting to as much as 750 billion euros during Trump's administration, with resultant fears of deflation likely leading to an interest rate cut by the ECB as early as this month and three additional cuts by the end of the year.
He emphasizes that the new administration in the White House views American military and economic dominance as a critical tool to maintain or enhance the US's power in the global hierarchy.
A shift in US foreign policy could result in a departure from the support for free trade, which has also encompassed the protection of global maritime routes, a policy observed since the end of World War II.
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