London market drops as Trump tariffs come into effect

The London market dropped sharply after heavy overnight falls on Wall Street after US President Donald Trump moved forward with planned tariffs against Canada and Mexico and doubled the levy on Chinese imports.

The FTSE 100 Index retreated from record highs notched up on Monday to drop more than 60 points at one stage after opening, later standing around 0.5% down at 8823.

Falls were also seen across Europe, with the Dax in Germany sinking 1.7%, while the Cac 40 in France was 1% down.

After initially pausing the tariffs, Mr Trump said that starting just past midnight local time, imports from Canada and Mexico would now be taxed at 25%, with Canadian energy products receiving 10% tariffs.

In addition, the 10% tariff that Mr Trump placed on Chinese imports in February is doubling to 20%.

The move – which was followed swiftly by retaliatory action from Canada and China – sent US markets tumbling into the red, with the Dow Jones Industrial Average closing 1.5% lower and the S&P 500 ending the session down 1.8%.

In Asia, the Nikkei 225 dropped 1.2% but China’s Hang Seng Index held largely firm, down 0.3%.

Mr Trump also paused US military aid to Ukraine in a major blow to its efforts to fight against Russia, following a heated exchange between the US president and Ukrainian President Volodymyr Zelensky, who was made to leave the White House early without signing a rare earth minerals deal.

Kathleen Brooks, research director at XTB, said the US tariffs imposed by Mr Trump took them “back to levels not seen for nearly 100 years”.

She said: “These are the largest US tariffs since the 1930s.

“There is already tit-for-tat retaliation from China and Canada, and we expect the same from Mexico.”

She added: “Tariffs did not do much to help the global economy or geopolitics 100 years ago.

“Trump, who professes to hate war, should remember the lessons that history teaches us.”

Among stocks in London, blue chip oil giants BP and Shell were heavy casualties, with shares down 4% and 3% respectively as the cost of crude dropped.

Banks and airlines were also lower in the FTSE 100, with Barclays nearly 3% lower and British Airways owner International Consolidated Airlines falling 4%.

Despite Mr Trump’s move to suspend US military aid to Ukraine, UK defence stocks continued to rally higher after big gains on Monday.

Engine maker Rolls-Royce rose 1%, while BAE Systems lifted another 0.2% after both stocks were among those rebounding on Monday following Prime Minister Sir Keir Starmer’s Ukraine coalition aid talks at the weekend.