Trump's Tariff 'Medicine' Sends Global Markets into Spasms

TOKYO (Reuters) - US President Donald Trump warned foreign governments they would have to pay "a lot of money" to lift sweeping tariffs, characterising the duties as "medicine" and delivering more pain for global financial markets on Monday 7 April 2025.

Asian equity markets sank across the board and oil prices plummeted as investors feared that the duties unveiled last week could lead to higher prices, weaker demand and potentially a global recession.

After stocks in mainland China and Hong Kong cratered on Monday, state media reported that China's sovereign fund was stepping in to try and stabilise the market.

Shares in Taiwan, meanwhile, plummeted almost 10%, the biggest one-day percentage fall on record, and stock futures pointed to another brutal day for markets in Europe and the US.

Speaking to reporters aboard Air Force One on Sunday 6 April 2025, Trump indicated he was not concerned about losses that have wiped out trillions of dollars in value 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.

Trump said he had spoken to leaders from Europe and Asia over the weekend, who hope to convince him to lower tariffs as high as 50% due to take effect this week.

"They are coming to the table. They want to talk but there's no talk unless they pay us a lot of money on a yearly basis," Trump said.

Trump's barrage of tariffs announced last week was met with bewildered condemnation from other leaders and triggered retaliatory levies from China, the world's No.2 economy.

Israel Prime Minister Benjamin Netanyahu is due to meet Trump later on Monday in a bid to seek a reprieve from the duties.

Billionaire fund manager Bill Ackman, who endorsed Trump's run for president, called for the tariffs to be paused to avert an "economic nuclear winter". "The president is losing the confidence of business leaders around the globe," he added.

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.

On Sunday talk shows, Trump's top economic advisers sought to portray the tariffs as a savvy repositioning of the US in the global trade order.

Treasury Secretary Scott Bessent said more than 50 nations had started negotiations with the US since last Wednesday's announcement. Commerce Secretary Howard Lutnick said the tariffs would remain in place "for days and weeks."

Prime Minister Shigeru Ishiba of Japan, one of Washington's closest allies in Asia, is also trying to cut a deal with Trump but told parliament on Monday that it may take time.

Investors, however, are not hanging around.

Tokyo's Nikkei plunged to a one-and-a-half-year low on Monday, led by the country's banks - some of the world's largest lenders by assets - which have shed almost a quarter of their market value over the last three trading days.

Even gold, usually a safe haven during times of market stress, was caught up in the market sell-off as investors dumped bullion to cover losses in other trades.

Investors are now wagering on the mounting risk of recession could see the US Federal Reserve cutting rates as early as next month.

White House economic adviser Kevin Hassett sought to tamp down concerns that the tariffs were part of a strategy to pressure the central bank to lower interest rates, saying there would be no "political coercion".

Fed chief Jerome Powell has indicated he is in no rush to take action.

JPMorgan economists now estimate the tariffs will see full-year US gross domestic product (GDP) decline by 0.3%, down from an earlier estimate of 1.3% growth.

Meanwhile, Goldman Sachs said the tariffs could lower GDP growth in China by at least 0.7% percentage points this year. It currently anticipates China to record 4.5% growth in 2025.

That uncertainty has clouded the outlook for other global policymakers. The Reserve Bank of New Zealand, the first major central bank to meet since Trump's tariff bombshell, is due to cut rates on Tuesday 8 April 2025 in what economists say could be the first of several this year.

Indonesia's central bank said on Monday it would "intervene aggressively" in domestic foreign exchange markets when they re-open on Tuesday to prop up its ailing currency.

Tariff dealmaking

US customs agents began collecting Trump's unilateral 10% tariff on all imports from many countries on Saturday 5 April 2025. Higher "reciprocal" tariff rates of 11% to 50% on individual countries are due to take effect on Wednesday 9 April 2025 at 00:01 EDT (06:01 CET).

Some other governments have already signalled a willingness to engage with the US to avoid the duties.

Taiwan's President Lai Ching-te on Sunday offered zero tariffs as the basis for talks with the US, pledging to remove trade barriers and saying Taiwanese companies will raise their US investments.

An Indian government official told Reuters the country does not plan to retaliate against a 26% tariff and said talks were under way with the US over a possible deal.

Vietnamese leader To Lam agreed in a phone call with Trump on Friday 4 April 2025 to discuss a deal to remove tariffs after the Southeast Asian manufacturing hub was slapped with some of the highest duties globally.

Trump called the discussion "very productive".