FTSE 100 Tumbles as Trump's Tariffs Spark Global Market Decline

London's FTSE 100 Index Tumbles Following Trump's Tariff Announcement

The London Stock Exchange's FTSE 100 Index took a hit on Tuesday, falling from its record highs set on Monday. This decline followed President Donald Trump's decision to move forward with planned tariffs against Canada, Mexico, and China.

The index initially dropped by more than 60 points before settling around 0.5% lower at 8823. This decline mirrored similar drops across Europe, with Germany's Dax index falling by 1.7% and France's Cac 40 down by 1%.

Trump's tariffs, which were initially paused, will now tax imports from Canada and Mexico at 25%. Canadian energy products will receive a 10% tariff, while the 10% tariff placed on Chinese imports in February will double to 20%.

This news sent US markets tumbling, with the Dow Jones Industrial Average closing 1.5% lower and the S&P 500 ending the session down 1.8%. In Asia, the Nikkei 225 dropped 1.2%, while China's Hang Seng Index remained largely firm, down 0.3%.

Kathleen Brooks, research director at XTB, commented on the tariffs, stating that they took the US "back to levels not seen for nearly 100 years." She added that these are the largest US tariffs since the 1930s and that retaliatory action from China and Canada is expected, with Mexico likely to follow suit.

Brooks further emphasized the historical context of tariffs, stating that they did not benefit the global economy or geopolitics 100 years ago and that Trump, who professes to hate war, should learn from history's lessons.

The announcement also impacted specific sectors within the FTSE 100. Blue chip oil giants BP and Shell saw significant losses, with shares dropping 4% and 3% respectively, as the cost of crude oil fell. Banks and airlines also experienced declines, with Barclays nearly 3% lower and British Airways owner International Consolidated Airlines falling 4%.

Despite Trump's move to suspend US military aid to Ukraine, UK defense stocks continued to rally higher after big gains on Monday. Engine maker Rolls-Royce rose 1%, while BAE Systems lifted another 0.2%. Both stocks were among those rebounding on Monday following Prime Minister Sir Keir Starmer's Ukraine coalition aid talks over the weekend.