Trump's Tariffs and Oil Price Declines Drag FTSE 100 Off Record High

The FTSE 100 index, which had been on a record-breaking streak, took a hit on Tuesday, March 4, 2025, as a result of Trump's new tariffs and a decline in oil prices. The UK's benchmark stock index fell 0.5% at the opening bell, slipping off the previous session's record close. This comes amidst a turbulent couple of weeks for Chancellor Rachel Reeves, with fluctuating gilt yields and falling inflation.

Trump's new 25% tariffs on imports from Mexico and Canada took effect on Tuesday, while duties on Chinese goods were doubled to 20%. This move sent global equities lower while safe haven assets such as government bonds gained in price. The move also fuelled fears that threatened reciprocal tariffs could go into effect next month.

Meanwhile, oil and gas was the biggest sectoral decliner, falling 3% to its lowest in over a month after OPEC+ decided to proceed with a planned April oil output increase, the first since 2022. Shares of Shell dipped 2.6% after the company announced an overhaul of its executive team.

However, defence stocks gained 2%, set for a seventh straight session of gains. British finance minister Rachel Reeves said she wants to speed up the procurement of defence equipment, while the European Commission proposed a new joint borrowing plan as part of an 800-billion-euro effort to lift defence spending.

Other defensive sectors rose, with the pharmaceutical and biotechnology index up over 1.7%. Precious metal miners rose 1.1% as gold prices gained as investors sought more safe havens.

Among individual stocks, equipment rental company Ashtead fell 4.8% to the bottom of the FTSE 100 after missing profit and revenue estimates. Shares of baker Greggs slumped 11% after sales growth slowed at the start of the year, and the company warned of a difficult year ahead.

Abrdn, however, leapt 11% after unveiling a new strategy, including a change of name to "aberdeen," while Intertek jumped 7% after raising margin expectations.

The FTSE 100's fall comes after a strong run, with the index gaining nearly eight per cent so far this year. The index had already broken its intraday high at 8532.58 on Friday afternoon, meaning it reached a high not seen before during trading hours.



The decline in oil prices is likely to have a negative impact on the financial performance of oil and gas companies listed on the FTSE 100 in both the short and long term. Lower oil prices mean reduced revenue for these companies, as they sell their products at lower prices. This can lead to a decrease in profit margins and overall profitability. Companies like Shell and BP, which are significant players in the FTSE 100, may see their share prices decline due to reduced earnings expectations.

Trump's tariffs, particularly those targeting key trading partners like Canada, Mexico, and China, as well as the extension of tariffs to other countries, have the potential to impact the broader UK economy and the FTSE 100's performance in the coming months. Increased uncertainty and volatility, as well as potential disruptions to supply chains, can negatively impact UK businesses and consumers, affecting economic growth and the FTSE 100's performance. The impact on sectors sensitive to global trade, currency fluctuations, and inflation can also play a role in shaping the FTSE 100's performance.

Defensive sectors, such as pharmaceuticals and biotechnology, have contributed to the FTSE 100's resilience amidst geopolitical uncertainties and market volatility. On Monday, March 4, 2025, the FTSE 100 gained despite concerns about the latest wave of tariffs from Trump 2.0. The pharmaceutical and biotechnology index rose over 1.7% on the same day, demonstrating the sector's resilience and ability to provide a safe haven for investors during uncertain times.