The FTSE 100 endured a bruising session on Monday, tumbling by 4.38% to close at 7,702.08 – its lowest level since March of the previous year – as fears of a global recession gathered pace amidst escalating US-China trade tensions.
Markets across the globe were roiled after former US President Donald Trump signalled a more aggressive approach to tariffs against China, triggering renewed anxiety over a deepening trade war. The turmoil rippled through European bourses, with London’s leading index suffering one of its worst trading days in recent memory.
The pound also weakened notably against both the dollar and the euro, as investors fled to perceived safe havens amid intensifying market uncertainty.
Wall Street did little to calm nerves, experiencing a volatile session. The S&P 500 seesawed dramatically, initially plunging before briefly recovering, only to drop again as conflicting reports emerged around the White House’s tariff intentions. By the time European markets had closed, the Dow Jones was down 1.52%, while the S&P 500 had lost nearly 1%.
European indices briefly pared losses during the afternoon, with some traders buoyed by speculation that the US could spare certain nations from the harshest tariffs. However, any optimism was short-lived. The White House quickly denied claims that countries other than China might be exempt, and Trump doubled down, threatening even harsher measures against Beijing unless it stepped back from its own retaliatory tariffs.
“The US has been taken advantage of for far too long,” Trump said in a statement posted on X, formerly Twitter. “We will act in the interest of American workers and industries. If that means more tariffs, so be it.”
Asian markets were already in freefall before the European bell. Japan’s Nikkei 225 slid by a staggering 7.8%, marking its lowest close since November 2021. China’s Shanghai Composite dropped over 7%, and Hong Kong’s Hang Seng index nosedived by more than 13% — its steepest single-day decline since the 1997 handover.
The panic in Asia spilled into European markets, with the FTSE 100 seeing its sharpest single-day drop since the onset of the Covid-19 pandemic in early 2020. Energy, financial, and manufacturing stocks led the declines, as global trade tensions cast a shadow over future earnings.
Monday’s sell-off marked the second consecutive week of turbulence, driven by uncertainty over global economic policy. Trump’s announcement last week of a baseline 10% tariff on all US trading partners, effective from Saturday, sent shockwaves through the international business community. China, in response, pledged a retaliatory 34% tariff on US imports, scheduled to come into effect on Thursday.
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Despite the market meltdown, Trump appeared unfazed. Speaking briefly to reporters outside his Florida golf club on Sunday, he remarked: “Sometimes you have to take medicine to fix something. I don’t want to see markets fall, but the US has to take a stand.”
Investors now face a week of extreme caution, with traders closely monitoring developments between the US and China. Analysts have warned that prolonged uncertainty and the risk of tit-for-tat tariffs could dampen global trade, stall growth, and trigger wider financial instability.
“This is not just about tariffs anymore,” said Marcus Redford, a senior markets strategist at Halifax Investments. “It’s about credibility, confidence, and control. If this escalates further, central banks may be forced into action.”
The Bank of England has yet to comment, but markets are bracing for possible interventions if volatility continues. With the FTSE at a year-low and global equities under strain, the coming days could prove pivotal for the world economy.
