Stocks fall as Trump warns of US economy trade war 'transition'
A sell-off in the US stock market gathered steam on Monday, fuelled by rising concern about the cost of the trade war to the world's largest economy.
The S&P 500, which tracks the biggest American companies, fell about 2% in early trade, while the Dow Jones dropped 0.9% and the Nasdaq sank more than 3.5%.
The falls came after President Donald Trump ducked questions about whether the US economy was facing a recession or price rises as a result of tariff moves, while warning instead of a "period of transition".
Commerce Secretary Howard Lutnick, however, insisted there would be no contraction in the US, although he acknowledged that the price of some goods may rise.
Investors fear that tariffs - which are taxes on goods applied as they enter the country - will lead to higher prices and ultimately dent growth in the world's largest economy.
"The level of tariffs that Trump is imposing, I think no doubt, will have to cause inflation somewhere down the line," Rachel Winter, investment manager at Killik & Co, told the Today programme.
Economist Mohamed El-Erian said investors had been optimistic about Trump's plans for de-regulation and lower taxes, while under-estimating the likelihood of a trade war.
He said the recent falls in the stock market, which started last week, reflect the adjustment of those bets.
"It's a complete change in what the market expected," he added, noting that investors are also responding to signs that businesses and households are starting to hold off on spending amid the uncertainty, which could hurt economic growth.
European stocks closed lower on Monday, with France's CAC and the London FTSE indices both closing around 0.9% lower. Germany's DAX closed 1.75% lower.
Susannah Streeter, head of money and markets at the stockbrokers Hargreaves Lansdown, said it was because of "unease around the impact of Trump tariffs". She added that concerns over the US economy entering a recession is worrying investors.
Tesla shares fell about 8% on Monday, while tech stocks Nvidia and Meta were both down more than 4%.
Speaking to Fox News in an interview broadcast on Sunday but recorded on Thursday, Trump appeared to acknowledge the concerns, responding to a question about whether the US was facing recession: "I hate to predict things like that. There is a period of transition because what we're doing is very big. We're bringing wealth back to America. That's a big thing."
"It takes a little time, but I think it should be great for us," he added.
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China to raise defense spending by 7.2% in 2025 to ‘firmly safeguard’ national security
China on Wednesday increased its defense spending by 7.2% this year, the same growth rate as in the prior two years, as Beijing seeks to “firmly safeguard” its national security.
In an official government report due to be released in parliament, China proposed a national defense budget of 1.78 trillion yuan ($244.99 billion) for the 2025 fiscal year.
The increased defense budget, well above China’s economic growth target for this year of roughly 5%, comes as Western governments seek to ratchet up military spending to bolster their own security.
The European Union announced Tuesday that it could mobilize as much as 800 billion euros ($841 billion) to shore up support for Ukraine amid Russia’s full-scale invasion. The move followed reports that the U.S. had abruptly paused military aid to Ukraine.
China budgeted a 7.2% increase in defense spending to 1.67 trillion yuan last year, the same growth rate as in the prior year. Beijing had increased spending by 7.1% in 2022 and 6.8% in 2021, according to official data.
When asked on Tuesday about China’s defense spending, Lou Qinjian, spokesperson for the third session of the 14th National People’s Congress, told reporters that “peace needs to be safeguarded with strength.”
That’s according to an official translation of his Mandarin-language remarks.
China’s defense expenditure as share of GDP has been held under 1.5% for many years, Lou said, adding that this rate of spending is lower than the global average.
China remains the world’s second largest military spender behind the U.S. which has set the military budget for 2025 at $850 billion.
Separately, expenditures earmarked for public security this year was raised by 7.3%, the official statement showed, a sharp increase compared with the 1.4% rise last year.
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China strikes back at Trump tariffs with 15% levies targeting US farmers
WASHINGTON (AP) — China retaliated against President Donald Trump’s tariffs with an additional 15% tax on key American farm products, including chicken, pork, soybeans and beef.
The escalating trade tensions punished U.S. markets Monday as investors fearful of the damage from from Trump’s trade wars put their money elsewhere.
The Chinese tariffs, announced last week, were a response to Trump’s decision to double the levy on Chinese imports to 20% on March 4. China’s Commerce Ministry had earlier said that goods already in transit would be exempt from the retaliatory tariffs until April 12.
Imposing tariffs on imports is a key part of Trump’s agenda. He believes the import taxes can raise money for the Treasury, protect American industries and pressure foreign countries to do what he wants in a range of issues, including immigration and drug trafficking.
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