World economies brace for tight Trump tariffs ahead of deadline

World economies were jittery on Monday ahead of US President Donald Trump’s “Liberation Day” when he is set to unleash tariffs against multiple countries, risking global turmoil to redress what he says are unfair trade imbalances.

Trump -- who has been making unprecedented use of presidential powers since taking office in January -- is set to announce Wednesday exactly what tariffs will be imposed and whether they will target entire sectors.

Trump insists that reciprocal tariffs are needed because the world’s biggest economy has been “ripped off by every country in the world.” But critics warn that the strategy risks a global trade war, provoking a chain reaction of retaliation by major trading partners like China, Canada and the European Union.

Market jitters intensified after Trump over the weekend said his tariffs would include “all countries.”

Trump’s fixation on tariffs is already fanning US recession fears. Goldman Sachs analysts raised their 12-month recession probability from 20 per cent to 35 per cent.

This reflects a “lower growth forecast, falling confidence, and statements from White House officials indicating willingness to tolerate economic pain.” Goldman Sachs also lifted its forecast for underlying inflation at end-2025.

Already, China and Canada have imposed counter-tariffs on US goods, while the EU unveiled its own measures due to start in mid-April. More countermeasures could come after Wednesday.

Ryan Sweet of Oxford Economics said to “expect the unexpected,” anticipating that Trump would “take aim at some of the largest offenders.”

What matters ultimately is how broad-based Trump’s tariffs are and whether the tool is merely a negotiating tactic or part of a regime shift, he said.

Besides reciprocal country tariffs, Trump could also unveil additional sector-specific levies on the likes of pharmaceuticals and semiconductors.

He earlier announced auto tariffs to take effect Thursday.

Economists have expected the upcoming salvo could target the 15 percent of partners that have persistent trade imbalances with the United States, a group that US Treasury Secretary Scott Bessent called a “Dirty 15.”

The United States has its biggest goods deficits with parties including China, the EU, Mexico, Vietnam, Taiwan, Japan, South Korea, Canada and India.

US trade partners have been rushing to minimize their exposure, with reports suggesting India might lower some duties.

European Central Bank President Christine Lagarde said Monday that Europe should move towards economic independence, telling France Inter radio that Europe faces an “existential moment.”

Separately, British Prime Minister Keir Starmer spoke with Trump in “productive negotiations” towards a UK-US trade deal, his Downing Street office said Sunday.

And German Chancellor Olaf Scholz said the EU would respond firmly to Trump’s tariffs, although stressing that the bloc is open to compromise.

President Donald Trump’s “Liberation Day” is fast approaching, and stock markets from Wall Street to Wellington, New Zealand, are falling Monday in advance of it.

In New York, the S&P 500 was down 0.8% following one of its worst losses of the past couple of years on Friday. It’s on track to finish the first three months of the year with a loss of 5.9%, which could make this its worst quarter in nearly three years.

The Dow Jones Industrial Average was down 111 points, or 0.3%, as of 10:10am and the Nasdaq composite was 1.7% lower.

The US stock market’s drops followed a sell-off that spanned the world earlier Monday as worries build that tariffs coming Wednesday from Trump will worsen inflation and grind down growth for economies.

In Japan, the Nikkei 225 index dropped 4%. South Korea’s Kospi sank 3%, and France’s CAC 40 fell 1.6%. In New Zealand, the NZX 50 slipped a more modest 0.1%.

Instead of stocks, which can be some of the riskiest investments, prices strengthened for things considered safer bets when the economy is looking shaky. Gold rose again to briefly crest $3,160 per ounce and was heading toward another record.

Prices for Treasury bonds also climbed, which in turn sent their yields down. The yield on the 10-year Treasury fell to 4.21% from 4.27% late Friday and from roughly 4.80% in January. It’s been falling as worries build about tariffs. On Wednesday, the United States is set to begin what Trump calls “reciprocal” tariffs, which will be tailored to match what he sees is the burden each country places on his, including things like value-added taxes.

If the April 2 tariffs end up being less onerous than investors fear - maybe Trump includes no additional tariff increases on China, for example - stocks could rally. But if they end up being a worst-case scenario, which also gets businesses so fearful that they start cutting their workforces, something that hasn’t happened so far, stocks could sink much further.

Agencies