The financial markets are reeling from the shock of new tariffs announced by former President Donald Trump, which have sent the CAC 40 index tumbling and left investors scrambling for safe havens. On Thursday, April 3, 2025, the CAC 40 plunged by 3.31% to close at 7,598.98 points, marking a significant decline as fears of a trade war loom large.
Asian markets mirrored this trend, with the Nikkei down 2.77% and the Hang Seng dropping 1.6% the same day. The overall atmosphere in the financial sector is one of uncertainty and volatility, as traders attempt to process the implications of Trump's tariff offensive.
In a dramatic announcement made after the closure of Wall Street on April 2, Trump revealed a series of punitive tariffs aimed at various global partners. The new tariffs include a minimum of 10% on all imports, with specific rates set at 20% for the European Union, 24% for Japan, 31% for Switzerland, 34% for China, and a staggering 50% for Lesotho. This sweeping move has drawn comparisons to early 20th-century tariff policies, raising alarms about a potential return to protectionism.
Market analysts are deeply concerned about the potential fallout from these tariffs. John Plassard, an investment specialist at Mirabaud, stated, "April 2, 2025, will go down in history as the day global trade tilted on its axis." The implications of this shift are expected to reverberate across various sectors, particularly those heavily reliant on exports to the U.S.
In response to the tariffs, European leaders have expressed their readiness to negotiate while also preparing for potential retaliation. Ursula von der Leyen, President of the European Commission, emphasized that it is "not too late" for discussions, but warned that the EU is "ready to react" if necessary. French government spokesperson Sophie Primas hinted at targeting American digital services, which could affect major tech companies like Google and Amazon.
French President Emmanuel Macron weighed in on the situation, asserting that "the American economy and Americans will come out weaker than yesterday, and poorer." This sentiment reflects widespread concern about the long-term consequences of Trump's trade policies on the global economy.
As the markets reacted to the news, sectors exposed to the U.S. market, such as luxury goods, automotive, and technology, experienced significant declines. In particular, the automotive giant Stellantis saw its shares drop by 8.12% to 9.37 euros after announcing the temporary closure of its Chrysler plant in Canada for two weeks due to the new tariffs. The company, formed from the merger of Peugeot-Citroën and Fiat-Chrysler, is particularly vulnerable, with estimates suggesting exposure to approximately 16 billion euros in new customs duties.
On the other hand, Danone emerged as a rare bright spot in the market, rising by 3.64% to 72.98 euros. The food giant benefited from an upgrade from Morgan Stanley, which raised its target price from 67 to 80 euros, citing anticipated sales growth. Since the start of the year, Danone's shares have gained over 11%, showcasing its resilience amid the broader market turmoil.
The financial turbulence continued into Friday, April 4, 2025, as the CAC 40 opened down 0.75% to 7,537.08 points, following Thursday's steep decline. Banks such as BNP Paribas and Société Générale fell more than 2%, reflecting the widespread impact of the tariff situation. The Vix, known as the "fear index," surged by 36% as volatility gripped the markets.
In the U.S., the Dow Jones dropped 3.89%, the S&P 500 fell 4.71%—its largest drop since 2020—and the Nasdaq Composite declined by 5.83%. The overall sentiment in the markets suggests a growing fear of recession, fueled by the potential economic fallout from the tariff hikes.
As the situation unfolds, attention will turn to upcoming employment data from the U.S. for March, scheduled for release on April 4, 2025. Analysts expect the country to have added 140,000 jobs in the non-agricultural sector, down from 151,000 in February, with an unemployment rate stable at 4.1%. Hourly wages are also projected to have increased by 0.3% month-over-month and 4% year-over-year.
Jerome Powell, Chairman of the Federal Reserve, is set to address the economic implications of the tariffs during a conference on the same day. His remarks will likely focus on inflation and the broader economic outlook, as the Fed navigates the challenges posed by the new trade landscape.
The chaos stemming from Trump's tariff offensive has left many in the financial world questioning the future of global trade and economic stability. As countries prepare to respond, the potential for a protracted trade war looms large, with ramifications that could affect economies worldwide.
As the markets brace for what may come next, investors are advised to remain vigilant and consider safe-haven assets as uncertainty reigns supreme. The unfolding events highlight the delicate balance of international trade and the interdependencies that exist in today's global economy.
