FTSE 100 Plunges as Trump Tariff Threat Looms

The FTSE 100 (^FTSE) tumbled on Monday morning as European markets opened lower, following US President Donald Trump's threat to impose tariffs on European goods. The blue-chip share index fell 1.2% to 8568.2 points, a decline of 105.8 points, soon after the London market began trading at 8am.

Trump warned the European Union and the UK that they would be hit with tariffs unless they "work it out," sending shockwaves through global markets. The US president said that tariffs on imports from Europe were coming and did not rule out imposing tariffs on UK goods, but reportedly said the situation with Britain "can be worked out."

European stock markets are bracing themselves for substantial losses following significant overnight declines in Asia, triggered by Trump's announcement of a series of tariffs, which has sparked concerns of a global trade war. Asian markets, which were the first to open since the weekend's tariff announcements, have already felt the impact, with Japan's Nikkei plummeting 2.8% and the Hang Seng in Hong Kong falling 1% lower. However, mainland Chinese markets will remain closed until Wednesday due to the Chinese Lunar New Year holiday.

The pound has edged lower against a strengthened US dollar, down 1% at just under 1.23 US dollars, but has risen 0.4% to 1.20 euros as the single currency comes under pressure.

Kathleen Brooks, research director at XTB, cautioned that stock markets "are likely to have a strong reaction" to Mr. Trump's initial wave of tariffs. She highlighted that the FTSE 100 might be buffered against the harshest drops due to optimism around a potential US deal, saying: "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. 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."



As the situation unfolds, investors should closely monitor the developments and consider the potential long-term effects of a global trade war on the FTSE 100. Diversifying portfolios, investing in defensive sectors, and staying informed about the latest developments can help mitigate the risks associated with Trump's tariff threats.