By Susan Heavey, David Lawder and Philip Blenkinsop
WASHINGTON/BRUSSELS (Reuters) -President Donald Trump’s sweeping tariff plans battered global markets again on Monday after he said foreign governments would have to pay “a lot of money” to get the levies removed, while U.S. stocks got a brief lift on hints of a pause, only to slide again.
Asian and European shares plunged and oil prices plummeted as investors feared the duties Trump likened to “medicine to fix something” at the weekend could lead to higher prices, weaker demand and potentially a global recession.
U.S. stocks initially tumbled as well, then rebounded after White House adviser Kevin Hassett said according to CNBC that Trump was considering a 90-day pause in tariffs for all countries except China. Stocks then slid again after the broadcaster cited the White House as saying the pause comment was “fake news”.
The European Union, which has been divided on how strongly to punch back against Washington without risking more pain for its own companies and consumers, said it wanted to negotiate but was also ready to retaliate. Commission President Ursula von der Leyen said the EU had offered Trump “zero-for-zero” tariffs on industrial goods.
Goldman Sachs raised the odds of a U.S. recession to 45% in the next 12 months, joining other investment banks in revising their forecast. JPMorgan economists now estimate the tariffs pushing the U.S. economy into a 0.3% contraction, down from an earlier estimate of 1.3% growth of gross domestic product.
“People are afraid the worst is yet to come. They’re worried about a market crash,” said Robert Pavlik, senior portfolio manager at Dakota Wealth Management in Connecticut.
“They’re worried about what follows – a recession here domestically and then globally, leading to a possible depression.”
Trump had shown no sign of relaxing his tariff policy earlier on Monday, blasting China for hitting back with retaliatory tariffs and repeating a call for the U.S. Federal Reserve to cut interest rates.
“The United States has a chance to do something that should have been done DECADES AGO. Don’t be Weak! Don’t be Stupid!” he wrote on social media.
Speaking to reporters earlier aboard Air Force One on Sunday, he also brushed off the losses that have wiped out trillions of dollars from world stock markets.
“I don’t want anything to go down. But sometimes you have to take medicine to fix something,” he said as he returned from a weekend of golf in Florida.
As Trump’s circle hit back at critics, White House trade adviser Peter Navarro said talk of a recession was “silly”.
Hassett, director of the National Economic Council, said separately that Trump had talked to world leaders all weekend and would listen to proposals for great deals.
“He’s doubling down on something that he knows works, and he’s going to continue to do that,” he said on Fox News. “But he is also going to listen to our trading partners, and if they come to us with really great deals that advantage American manufacturing and American farmers, I’m sure he’ll listen.”
The tariff announcement has met with bewildered condemnation from other leaders and triggered retaliatory levies from China, the world’s No.2 economy, which called Trump’s behaviour “economic bullying”.
After stocks in mainland China and Hong Kong cratered on Monday, China’s sovereign fund stepped in to try to stabilise the market.
Shares in Taiwan plummeted almost 10% – the biggest one-day percentage fall on record.
Wall Street leaders issued warnings on U.S. tariffs, with JPMorgan Chase CEO Jamie Dimon saying they could have lasting negative consequences, while fund manager Bill Ackman said they could lead to an “economic nuclear winter.”
Elon Musk, the world’s richest man and a close ally to Trump in a crusade to cut government spending, on Saturday said he hoped to see zero tariffs between the U.S. and Europe. On Monday he posted on social media a video of economist Milton Friedman extolling the virtues of the international trading system.
TACTICS, OR NEW REGIME?
Investors and political leaders have struggled to determine whether Trump’s tariffs are part of a permanent new regime or a negotiating tactic to win concessions from other countries.
“We stand ready to negotiate with the US. Indeed, we have offered zero-for-zero tariffs for industrial goods as we have successfully done with many other trading partners” said the EU’s von der Leyen.
Some in the EU worry that a forceful response risks even more blowback on European exporters of everything from French Cognac and Italian wine to German cars.
In a sign of companies in Germany and elsewhere grappling with the fallout, Volkswagen’s Audi is holding back cars that arrived in U.S. ports after April 2 because of the newly imposed 25% autos tariff. Aircraft parts supplier Howmet Aerospace may halt some shipments if they are impacted by tariffs, according to a letter seen by Reuters.
Prime Minister Shigeru Ishiba of Japan, one of Washington’s closest allies in Asia, held a phone call with Trump to push for a deal and said he would visit Washington at an appropriate time.
Investors are now betting the growing risk of recession could see the U.S. Federal Reserve cut rates as early as next month. Fed chief Jerome Powell has so far indicated he is in no rush though.
Some governments in Asia have already signalled a willingness to engage with the U.S. to avoid the duties.
Taiwan’s President Lai Ching-te on Sunday offered zero tariffs as the basis for talks, while an Indian government official said Delhi does not plan to retaliate.
(Reporting by Reuters newsrooms; Writing by Andy Sullivan, John Geddie, Matthias Williams; Editing by Lincoln Feast and Hugh Lawson)
