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London’s FTSE 100 Index has fallen from Monday’s record highs following Donald Trump‘s decision to move forward with planned tariffs against Canada and Mexico, and to double levies on Chinese imports.
The index initially dropped by more than 60 points before settling to stand around 0.5 per cent down at 8823.
Across Europe, Germany’s Dax index fell by 1.7 per cent, while France’s Cac 40 was down by 1 per cent.
Trump’s tariffs, which were initially paused, will now tax imports from Canada and Mexico at 25 per cent, with Canadian energy products receiving 10 per cent tariffs. The 10 per cent tariff placed on Chinese imports in February is doubling to 20 per cent.
Retaliatory action from Canada and China sent US markets tumbling, with the Dow Jones Industrial Average closing 1.5 per cent lower and the S&P 500 ending the session down 1.8 per cent.
In Asia, the Nikkei 225 dropped 1.2 per cent, but China’s Hang Seng Index remained largely firm, down 0.3 per cent.
Trump also paused US military aid to Ukraine after a heated exchange with Ukrainian President Volodymyr Zelensky.
Kathleen Brooks, research director at XTB, said the US tariffs imposed by Mr Trump took them “back to levels not seen for nearly 100 years”.
She said: “These are the largest US tariffs since the 1930s.
“There is already tit-for-tat retaliation from China and Canada, and we expect the same from Mexico.”
She added: “Tariffs did not do much to help the global economy or geopolitics 100 years ago.
“Trump, who professes to hate war, should remember the lessons that history teaches us.”
Among stocks in London, blue chip oil giants BP and Shell were heavy casualties, with shares down 4 per cent and 3 per cent respectively as the cost of crude dropped.
Banks and airlines were also lower in the FTSE 100, with Barclays nearly 3 per cent lower and British Airways owner International Consolidated Airlines falling 4 per cent.
Despite Mr Trump’s move to suspend US military aid to Ukraine, UK defence stocks continued to rally higher after big gains on Monday.
Engine maker Rolls-Royce rose 1 per cent, while BAE Systems lifted another 0.2 per cent after both stocks were among those rebounding on Monday following Prime Minister Sir Keir Starmer’s Ukraine coalition aid talks at the weekend.