Trump’s Tariffs Shake Global Markets, Trigger Trade Tensions

US President Donald Trump’s latest round of tariffs on exports from dozens of countries has triggered a sharp sell-off in global stock markets and sent governments and companies scrambling to renegotiate trade terms.

Pushing forward with the most aggressive tariff strategy since the 1930s, Trump imposed new duties on imports from 69 countries. Switzerland, which faces a 39% rate, and India, which faces a 25% rate, have both called for renewed dialogue. Other new tariffs include a 35% rate on Canadian goods, 50% on Brazilian exports, and 20% on shipments from Taiwan, which described the rate as temporary.

According to analysts at Capital Economics, the new measures lift the US average effective tariff rate to about 18%, up from just 2.3% a year ago. The financial markets responded swiftly, the Dow Jones had fallen 0.96%, the S&P 500 dropped 1.21%, and the Nasdaq slid 1.65%. A weaker-than-expected July jobs report further spooked investors, revealing a slowdown in hiring and a downward revision to June’s figures.

In the European Union, the STOXX 600 fell 1.89% on Aug. 1 and closed the week down 2.5%, its worst weekly performance since Trump launched his first major tariff campaign in April.

Despite the market turbulence, Trump officials defended the tariff strategy. Stephen Miran, Chairman, Council of Economic Advisers, says that the uncertainty surrounding tariffs had created leverage that helped the US secure “monumental” trade deals.

However, implementation remains murky. The European Union, which reached a preliminary agreement with the United States, is still awaiting executive orders to confirm exemptions in sectors like autos and aviation. Additionally, confusion surrounds new transshipment rules that threaten 40% tariffs on goods suspected of being rerouted from high-tariff countries such as China.

Meanwhile, early signs suggest the tariffs are already feeding into consumer prices. US Commerce Department data showed prices for home furnishings and durable household goods rose 1.3% in June, the sharpest monthly increase since March 2022.

Global Reactions: Pushback, Relief, and Adaptation

Countries hit hardest by the tariffs are seeking relief. Switzerland called the move a severe blow to its export sector and is pursuing a negotiated resolution. “It is a massive shock,” says Jean-Philippe Kohl, Deputy Director, Swissmem. South Africa’s Trade Minister Parks Tau vows to pursue “practical interventions” to mitigate the 30% tariff’s impact on jobs and economic stability.

In Southeast Asia, the outcome was more favorable. Several nations saw their expected tariffs reduced to an average of 19%, which regional officials say could help preserve competitiveness. Thailand’s finance minister noted the reduction from 36% to 19% should boost investor confidence and stimulate growth.

Australia also emerged relatively unscathed, retaining a 10% minimum rate. Trade Minister Don Farrell said the unchanged tariff level could strengthen Australian export competitiveness in the US market.

Still, economists warn the long-term effects will be damaging. “There are no real winners in trade conflicts,” says Thomas Rupf, CIO Asia, VP Bank.  In response, companies are seeking legal and logistical workarounds. EU firms like L’Oréal are increasingly turning to the US “First Sale” rule, which allows import duties to be calculated on the product’s factory price, rather than its final retail value, lowering the tariff burden.

Canada, Mexico: Divergent Paths in Trade Talks

Trump has invoked emergency powers to implement the new tariffs, arguing that many partners have failed to address trade imbalances or align with US economic and security interests.

One executive order raised tariffs on Canadian goods linked to fentanyl production from 25% to 35%, citing insufficient cooperation on curbing illicit narcotics. In contrast, Mexico received a 90-day reprieve from a planned 30% tariff, allowing time for broader trade negotiations. Canadian Prime Minister Mark Carney condemned the move, vowing to defend Canadian jobs and expand export markets.