Shares in FTSE giant Rolls-Royce plunged by as much as 10% on Friday, April 4, 2025, amid escalating fears of a global trade war. The downturn came after China announced a hefty 34% retaliatory tariff against the United States, sending shockwaves through global markets. Rolls-Royce, a significant exporter of aircraft and marine engines, saw its stock price drop to a one-month low of 682p, as reported by City AM.
The company's operations are deeply intertwined with the global supply chain, which relies on components sourced from various countries and distributes finished products worldwide. Consequently, the implications of such trade tensions are particularly pronounced for Rolls-Royce. The FTSE 100 index suffered a sharp decline of up to 3.8%, while the FTSE 250 dropped over three percent.
During a controversial speech dubbed 'Liberation Day', President Donald Trump announced a ten percent import tax on UK goods, setting the baseline rate for the escalating trade conflict. This move followed a series of tariff announcements that have left many sectors of the economy bracing for impact. Russ Mould, investment director at AJ Bell, remarked, "With markets having suffered their worst week in five years, investors were hiding under their duvet on Friday hoping the pain would go away." He noted that the relentless selling persisted, with markets falling across Asia and Europe, and futures prices indicating that the US would follow suit once trading commenced.
The European markets also felt the sting of these escalations, with Germany's DAX dropping nearly five percent and France's CAC 40 plunging over four percent. Trump's speech included a declaration of a 20% tariff rate on European Union imports to the US, which he justified by claiming that the US had been "taken advantage of" for years. Derren Nathan, head of equity research at Hargreaves Lansdown, commented on the situation, stating, "Despite months of sabre-rattling by Donald Trump, markets appear to have been unprepared for the depth and breadth of tariffs announced by the White House."
As tensions between the US and China escalate, the impact on international trade is becoming increasingly evident. On Friday, European banking and mining stocks bore the brunt of the selloff, with UK banks Barclays, NatWest, and Lloyds Banking Group down 9.12%, 8.99%, and 7.32% respectively. Global mining companies Glencore and Antofagasta also saw significant declines of 9.74% and 8.13%. The situation is compounded by China's ministry of commerce stating that its tariffs are a direct response to Trump's increased duties imposed on Beijing.
Moreover, total levies on Chinese exports to the US are set to rise by more than 60% after Trump's latest announcements on 'Liberation Day'. Starting April 10, China will begin imposing tariffs on all imported goods from the US, just a day after the US tariffs take effect. The oil market is also feeling the pressure; oil prices have fallen to their lowest level since August 2021, driven down by the prospect of a global trade war. US investment bank Goldman Sachs has revised its December 2025 forecasts for global US benchmarks Brent crude and WTI down by $5 to $66 and $62 a barrel, respectively, citing tariff escalation and increased OPEC+ supply as key downside risks.
Russ Mould further elaborated on the prevailing market sentiment, stating, "Unfortunately, the relentless selling continued, with markets falling across Asia and Europe and futures prices implying the US will do the same when trading begins later on. There are so many moving parts that getting your head around the situation isn’t easy. With countless sectors set to be hit by tariffs, it’s difficult to know where to begin to comprehend the situation." He added that investors looking to buy on the dip were overwhelmed by the sharp declines seen across the market this week, noting, "It’s now a question of when investors feel brave enough to go shopping. Today’s extended sell-off implies investors are still too nervous to take the plunge."
Despite the turmoil, some defensive stocks managed to buck the trend. Companies like SSE, British American Tobacco, and Diageo saw gains amidst the broader market selloff. Mould quipped, "You can see where people’s priorities lie – keeping the lights on, having a smoke, and a pint of Guinness are simple pleasures when the world is falling apart."
As the situation continues to unfold, Rolls-Royce is reportedly ramping up its production stateside to mitigate the effects of Donald Trump’s trade tariffs. Reports suggest that the company is exploring how much of its production could be moved to the US to avoid the fallout from international trade conflicts. As the global economy braces for the potential fallout from these trade tensions, the coming weeks will be crucial for investors and companies alike.
