Trump tariffs reside: China hits US with large 34% tariff after FTSE drops in market meltdown

Chancellor Rachel Reeves has said that the UK government is “determined to get the best deal we can” with the United States.

“Well, of course, we don’t want to see tariffs on UK exports, and we’re working hard as a government in discussion with our counterparts in the US to represent the British national interest and support British jobs and British industry,” Ms Reeves said.

“Those conversations are ongoing at the moment, but we’re determined to get the best deal we can for our country.”

Declining to give a timeframe for when she expected those discussions to bear fruit, Ms Reeves said: “I’m not going to give a running commentary on those discussions. They’ve been ongoing since our prime minister Keir Starmer had a successful visit to the White House to meet President Trump just a few weeks ago.

“Those conversations are ongoing. We want to do everything in our power, and we’ll continue to do everything in our power to get the best possible deal for British industry, working closely with them to protect prosperity and jobs here in the UK.”

Our associate editor Sean O’Grady writes:

Like something out of a The Incredible Hulk movie (except orange, not green), Donald Trump has burst out of his metaphorical shirt, let out an almighty roar, unleashed his strength and has set about smashing up the world trade system.

This week has witnessed a range of economic destruction on a scale unmatched by anything since the Second World War: almost comically random tariff schedules, deranged reasoning – are they a mere tactic or a permanent fixture? – and a certain satisfaction in punishing “friend and foe” alike. No one – not even the countries that have a trade deficit with America – were spared.

Cowering in a corner we find the world’s economists, consumers, great companies and investors, all terrified by what The Incredible Tariffing Hulk of Washington might do next. The World Trade Organisation ran from the scene long since. Something like $3 trillion of value has been wiped off the world stock markets, and even that may only be the start.

The sheer speed and scale of what Trump is doing – if he’s serious and keeps smashing through the guardrails – threatens to tip the world into recession, and America with it.

To put some of today’s FTSE 100 falls into perspective, it’s worth looking closer at NatWest.

At around a £36bn market capitalisation value, losing 9.8 per cent (as it currently stands today) is a drop of about £3.5bn on the day.

The share price itself is about 55p lower than it was a month ago and, as a side note, as part of an agreed process dating back to the bailout, the UK government has been gradually selling down its stake in NatWest shares – it still held around 11 per cent of the company in November, but by March was down to under five per cent.

NatWest shares are now back to about the level from January, having risen more than 40 per cent across the last year.

Downing Street has pushed back against Donald Trump’s claim that Sir Keir Starmer is “very happy” with Britain’s tariff treatment.

Asked whether it was right to say the prime minister was very happy, a No 10 spokesperson said: “I think you have the business secretary’s words … we’re disappointed by the tariffs that have been brought in.

“Clearly, there will be an economic impact from the decisions the US has taken, both here and globally, but both the prime minister and the business secretary have been very clear over the last 24 hours that we will continue to act in the best interests of the UK, and we’re prepared to do so.”

Our business and money editor Karl Matchett writes:

If investors – and more pertinently, people in general who need to spend money on goods and services – were hoping Trump’s tariffs wouldn’t lead to an all-out trade war, China’s response today doesn’t really offer much reason for hope.

A reciprocal 34 per cent tariff on all US goods, plus restricting the movement of rare-earth minerals, is probably going to just be the start of the blowback towards the US. As for what this might mean in market terms, it’s certainly going to contribute to the expected further falls on Friday.

The S&P 500 futures show a likely opening at around 2.9 per cent lower than yesterday’s close, with likely more to come if further nations announce similarly to China. “Markets are likely to remain volatile over the coming days as US trade partners determine their responses,” said Jason Hollands, managing director at investment management firm Evelyn Partners.

On a more practical level, it’s not yet really clear if, for example, a US-based company which sent materials to China, had their product made and then shipped it back for selling Stateside would now need to pay two lots of tariffs, but in any case we can expect rapid changes in supply chains to be high on the agenda for many companies in the coming weeks.

That has a knock-on effect to everybody, as shipping needs change, materials are re-routed, the cost or time of coming into the country from a different location could rise, then in turn demand could increase due to shortages … on and on it goes. A lot of change is likely if these tariffs and responses stick.

Sir Keir Starmer will speak to other leaders over the weekend on the shifting “global economic landscape”, Downing Street has said – repeating its stance to remain cool-headed in response to Donald Trump’s tariffs.

“We are very much aware that the global economic landscape is shifting,” the prime minister’s spokesperson told reporters.

“It means we have a responsibility to work even more closely with other countries to maintain stability and strengthen our partnerships abroad and you’ll see the prime minister engaging with international leaders over the weekend on this.”

Midway through the trading day and only seven FTSE 100 companies are in the green – and only four of those by more than a quarter of a percent.

Energy shares are the outlier today and gains for SSE, United Utilities and National Grid don’t even come close to making up for losses elsewhere, with London’s top index down 3.9 per cent on the day, marking a seven per cent fall for the past month.

That said, for the smaller listed companies on the LSE it’s even more brutal: seven per cent off their combined market cap in the past five days alone, including 3.9 per cent today.

The banking and finance sector is being hard-hit once more amid fears of a global recession looking more likely, with Paragon Banking, Lion Finance Group and TBC Bank Group all down by more than eight per cent in the FTSE 250. In the main index, NatWest is down 10.2 per cent and Barclays 11.2 per cent today.

The below graph, from the London Stock Exchange, shows the FTSE’s downwards trajectory in recent days:

Investors have given their reactions to China’s retaliatory 34 per cent tariffs on all US goods, in remarks to Reuters.

Eddie Kennedy, of London-based firm Malborough Investment, said: “Others have maybe learned their lessons [from Trump’s last term]. They are fighting back and saying we can play the same game as you and we are more in a position of strength to negotiate.

“All that is doing is escalating the issue and causing more negative feedback into the market. The biggest concern is this gets pushed onto the consumer.”

Jan Von Gerich, of Helsinki-based Nordea, said: “The reaction from China appears stronger-than-expected but we have to look at the detail. If Trump reacts to China’s retaliation, then markets could take another hit. There is a risk that things are going too far in the markets selloff, but who wants to catch a falling knife?”

And Samy Chaar, of Geneva’s Lombard Odier, said: “It’s still early to make a final assessment. There are two paths from here: There is the one where [Trump] shows openness to deals and even if we have a harsh start, with reciprocal tariffs and these responses by China, they show willingness to talk and bring tariffs lower in the months to come.

“The other path is he has no appetite to strike deals, wishes to maintain the tariffs for an extended period of time and that breaks the machine. I don’t think this [Chinese retaliation] is a signal for one or the other. Everyone will flex their muscles, but it doesn’t invalidate the idea that they make a deal at some point.

“But beside that, we need to have signs that at some point Trump is making comments that he is expecting to strike a deal.”

Foreign secretary David Lammy has said people across the country are “very concerned” about how the move by the United States to place 10 per cent import taxes on goods would hit their own finances.

Here is a look at how households may find their finances could be affected:

China exported goods worth a total of $436bn to the United States in 2023, according to the Observatory of Economic Complexity.

China’s main export – totalling $54bn – was broadcasting equipment, followed by computers ($37bn) and office machine parts ($14bn), according to the OEC.

Conversely, the US is calculated to have exported $154bn to China in 2023, including services and products such as soybeans, crude petroleum and petroleum gas.

For combined goods and services exports in 2021, China was the top export market for four US states, in the top three markets for 38 states, and within the top five markets for all but three states, according to a 2023 report by the US-China Business Council.