Investing.com - U.S. stock futures slide after U.S. President Donald Trump reveals a slew of new tariffs that threaten overhaul a global trading order that has been in place for decades. Trump’s pronouncements include sweeping levies on all imports into the country as well as higher duties on countries he has deemed to be "bad actors" in trade. At the same time, previously-announced auto tariffs come into effect, adding to the trade turmoil.
1. Trump unveils sweeping tariffs
Trump announced his broadest slate of tariffs to date on Wednesday, saying he would slap a baseline 10% duty on all foreign imports into the U.S. and impose greater levies on several longstanding trading partners in a bid to respond to perceived unfair trade practices.
China, the European Union, India, and Japan are among a number of countries set to face elevated so-called "discounted reciprocal" tariffs that aim to address foreign charges and other non-trade barriers. The White House considers these nations to be "bad actors" on trade.
At an event at the White House Rose Garden, Trump revealed a fresh 34% tariff on China, stacking on top of a 20% surcharge he already put in place earlier this year. Wedbush Securities analyst Dan Ives warned that tech stocks would likely be under pressure due to these tariffs.
Imports from the EU, another frequent target on Trump’s trade-related ire, face a new 20% tariff, while goods exported from India into the U.S. will have a 26% tariff placed on them. A 24% tariff will imposed on items from Japan as well.
The 10% baseline tariff will go into effect on April 5, while the higher tariffs will begin on April 9.
Trump and White House officials have argued that these moves are necessary to address trade imbalances, bolster government revenue, and reshore lost manufacturing jobs.
"[W]e’re going to start being very wealthy again," Trump said.
However, many economists have warned that the actions will drive up prices and weigh on growth, and businesses have complained that uncertainty around the tariffs has made planning out their operations difficult.
"In the long run it may deliver positives for the U.S. economy, but the measures taken mean a painful transition period ahead," said James Knightley, Chief International Economist at ING.
2. Investors jittery after tariffs announced
Wall Street was rattled after the announcement, with U.S. stock futures pointing to a further downturn in equities and a softening dollar.
By 03:25 ET (07:25 GMT), the Dow futures contract had shed 1,010 points, or 2.4%, S&P 500 futures had plunged by 166 points or 2.9%, and Nasdaq 100 futures had shed 645 points or 3.3%. The main averages had notched marginal gains in the prior session.
Equities in Asia, the first markets to open after the pronouncements, tumbled.
The dollar index, which tracks the greenback against a basket of currency pairs, slipped, and a flight away from risk weighed on Bitcoin.
Gold, typically seen as a safe haven in times of market distress, remained around record highs, while oil prices -- sensitive to how the tariffs could sway global crude demand -- sank.
"Trump’s tariff details are about as bad as they could have been," analysts at Vital Knowledge said in a note to clients.
"Rather than espouse a conciliatory attitude emphasizing the potential for the tariffs to move lower in the coming months following a period of negotiation, Trump instead framed his new duties as a necessary tool to rectify decades of poor trade deals and rebuild a decimated U.S. manufacturing base."
3. Auto tariffs come into effect
The reciprocal tariffs are not the only new levies now in place on Thursday.
Tariffs of 25% on all automobiles manufactured overseas came into effect as of midnight, although those that are in compliance with rules established under the U.S.-Mexico-Canada Agreement -- a trade accord signed during Trump’s first term -- will avoid tariffs for now. A duty on automotive parts is due to take effect on May 3.
U.S.-listed shares in American automakers, including Ford (NYSE:F), General Motors (NYSE:GM), and Jeep-parent Stellantis (NYSE:STLA), all dipped in extended hours trading.
Trump previously rolled out a string of other tariffs that were already in effect, including a 25% import levy on goods from Mexico and Canada not compliant with the USMCA. Energy products and potash received a 10% tariff. Neither country will be subject to any new tariffs beyond these.
A separate 25% tariff was also applied to all steel and aluminum imports in March. The metals, along with vehicles and their parts, are not subject to the new tariffs. Energy and other "certain minerals that not available in the United States" will also be exempt.
Trump has floated imposing an additional 25% tariff on imported copper and lumber as well, along with an extra 25% tariff on goods from any country that buys oil and gas from Venezuela.
4. Tariff countermeasures in focus
Trump’s announcement of sweeping new tariffs, coupled with his previous pronouncements, marked the latest step in a brewing worldwide trade war.
Reactions came in from around the globe, as questions swirled around how open the White House would be to negotiating updated trade deals.
China vowed to unveil its own response, saying there were no winners in a global trade war. The country’s commerce ministry called the tariffs "unilateral bullying."
European Commission President Ursula von der Leyen, meanwhile, pledged that a united bloc would respond to the levies, warning "if you take on one of us, you take on all of us." She previously said the EU had a “strong plan” to counteract Trump’s tariffs, although she said the bloc would prefer to negotiate.
Switzerland’s president said it had noted the 31% tariff it was hit with, adding that the European nation -- which is not in the EU -- "will quickly determine how to proceed."
Australian Prime Minister Anthony Albanese said the tariffs had "no basis in logic," but refrained from imposing retaliatory tariffs, calling them a "race to the bottom."
5. Fed’s Kugler on inflation risks
Elsewhere on Wednesday, Federal Reserve Governor Adriana Kugler said there were "upside risks" to inflation associated with Trump’s policy changes, including the import tariffs.
Speaking at an event at Princeton University, Kugler said progress towards the U.S. central bank’s ultimate inflation target of 2% has slowed and may have ground to a halt, citing this as a reason for leaving interest rates unchanged.
Kugler added that the job market is showing some signs of easing, but is not weakening significantly.
The rate-setting Federal Open Market Committee kept borrowing costs steady at a range of 4.25% to 4.50% at its latest meeting in March, partly citing a lack of clarity around the impact of the tariffs. But policymakers’ projections for 2025 did show that they anticipate inflation will be elevated and growth slower than they had expected in December.