The US President Donald Trump has sparked fears of a global trade war and overnight there was steep declines and the stock market across Europe is expected to suffer some large fall.
Falls are expected for the FTSE 100 Index amid Trumps warnings on tariffs on imports from the EU and lower stock indices are also expected to open lower in Europe.
The US President has not ruled out imposing tariffs on UK goods, but offered an olive branch saying things can be worked out.
Over the weekend Trump hit Mexico, China and Canada with harsh tariffs and these countries have vowed they will retaliate.
Asian markets opened on Monday which saw the Nikkei plummeting to 2.8% and the Hang Seng opened at 1% lower.
The pound fell 1% under $1.23 then rose 0.4% to €1.20.
Kathleen Brooks, research director at XTB, warned that stock markets “are likely to have a strong reaction” to Trump’s tariffs.
She said, “European stocks are expected to open sharply lower, and we expect the most severe declines for cyclical stocks and for the big exporters.
“Not only is the UK a defensive-style index, especially the FTSE 100, but it is not facing an immediate threat of tariffs; even so, the FTSE 100 is still pointing to a 0.8% decline at the start of this week.
“This does not mean that the UK economy will avoid impact from the tariffs, but it does mean that the UK economy could be more resilient than elsewhere.”
Speaking about the global outlook, Brooks said, “It’s too early to know exactly what impact tariffs will have on the global economy, but it is fair to say that they have a high potential of triggering inflation, and weighing heavily on global growth, including the US economy.”
The US President has hinted that the UK is “out of line” with their trade practices, this could be resolved.
Speaking to reporters Trump said, “The UK is way out of line, and we’ll see” and hit out hard against the EU calling their trade practices as an “atrocity” and they will be hit with tariffs “pretty soon.”
“The United States has been ripped off by virtually every country in the world,” he said.
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