Shares in London bounced back despite China vowing to “fight to the end” in an escalating tariff war with US president Donald Trump.
The FTSE 100 was up around 135 points, or 1.74%, by mid-morning on Tuesday – a day after the blue chip index suffered another big fall. Despite the partial fightback, it remains more than 700 points down on where it was early last week, just before President Trump dropped his global tariff bombshell.
It came amid a wider calm on the markets globally following a heavy sell-off since late last week which has seen around £7trillion wiped off shares around the world.
The mayhem was sparked by President Trump announcing blanket 10% import tariffs on almost all countries, and considerably more for many. He upped the ante this week by giving China – the world’s second biggest economy – an ultimatum to back down on tariffs on US goods. Beijing responded after Washington hiked levies on its imports to the States. President Trump has warned he will jack up tariffs by another 50%.
China has now hit back, vowing not to bow to “blackmail” from the US. “The US side’s threat to escalate tariffs against China is a mistake on top of a mistake, once again exposing the American side’s blackmailing nature,” China’s commerce ministry said. “If the U.S. insists on having its way, China will fight to the end.”
The EU proposed counter-tariffs of its own to President Trump’s tariff onslaught that swept up dozens of countries, sent financial markets into a tailspin and fuelled expectations that the global economy may be headed for recession.
Stock markets found a firmer footing after a gut-wrenching few days for investors which prompted some business leaders, including those close to the President, to urge the him to reverse course. Japan’s Nikkei index rose 6% on Tuesday, rebounding from a more than one year low hit in the previous session, after Trump and Japanese Prime Minister Shigeru Ishiba agreed to open trade talks.
Chris Beauchamp, chief market analyst at online trading platform IG, said: “It was almost inevitable that risk appetite would recover somewhat after the cataclysmic selling and doom-laden commentary of the past week. Stocks have rallied off their lows as investors seize on comments that indicate negotiations over tariffs are beginning.”“Sentiment remains fragile, and with China pledging to fight ‘to the end’ and the EU announcing fresh tariffs (albeit delayed for now) we are not out of the woods yet.”
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Matt Britzman, senior equity analyst at Hargreaves Lansdown, said: “Investors are waking up to a positive sight for once, with markets opening higher across a broad range of European indices and the FTSE 100 up 0.9% at the open. However, this should hardly be seen as the end of the trouble, especially with President Trump showing no signs of easing his stance on perceived trade imbalances, having doubled down on China.
“Still, there is a glimmer of hope, as Japanese markets are up nearly 6% following news that trade talks will begin in a few days. The sooner deals are reached, the quicker companies and investors can gain some clarity on the lay of the land.”
President Trump remained defiant, telling reporters at the White House: “It’s the only chance our country will have to reset the table. Because no other president would be willing to do what I’m doing, or to even go through it.”
The European Commission has proposed counter-tariffs of 25% on a range of US goods, including soybeans, nuts and sausages, though other potential items like bourbon whiskey were left off the list, according to a document seen by Reuters. Officials said they stood ready to negotiate a “zero for zero” deal with Trump’s administration. “Sooner or later, we will sit at the negotiation table with the U.S. and find a mutually acceptable compromise,” EU Trade Commissioner Maros Sefcovic said at a news conference.
Administration officials say dozens of other countries have reached out with the hope of heading off the tariffs due to take effect on Wednesday.
White House economist Kevin Hassett said on Fox News: “He’s doubling down on something that he knows works, and he’s going to continue to do that. But he is also going to listen to our trading partners, and if they come to us with really great deals that advantage American manufacturing and American farmers, I’m sure he’ll listen.”
However, Wall Street heavyweights continued to issue warnings over the tariffs, with JPMorgan Chase chief executive Jamie Dimon saying they could have lasting negative consequences, while fund manager Bill Ackman said they could lead to an “economic nuclear winter.” Mr Ackman is one of a handful of Trump supporters who questioned the strategy. Billionaire Elon Musk, who is leading Trump’s effort to slash government spending, called for zero tariffs between the US and Europe over the weekend. Trump trade adviser Peter Navarro dismissed the Tesla CEO as a “car assembler.”
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