Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
So much for the season of goodwill! Donald Trump has spooked the financial markets again, with a fresh flurry of tariffs that further escalate his trade war war.
Overnight, the Trump administration on Monday proposed new tariffs up to $2.4bn of French goods. Prized exports, including champagne, cheese, handbags, porcelain, cheeses and yoghurt would incur a new levy of up to 100%.
This swingeing move is a retaliation against France’s new digital services tax, which Washington says unfairly discriminated against American technology companies such as Amazon, Google and Facebook.
US Trade Representative Robert Lighthizer declared that the move:
“sends a clear signal that the United States will take action against digital tax regimes that discriminate or otherwise impose undue burdens on US companies.”
The move casts a shadow over today’s meeting of NATO leaders in London, to celebrate the 70th anniversary of the military alliance.
The attack on French exporters came just hours after Trump announced he was raising tariffs on steel and aluminium from Brazil and Argentina, in retaliation for their currencies falling to record lows.
That knocked stocks across the globe, with European stock markets suffering their worst day in two months on Monday. Wall Street also suffered, with the Dow losing almost 1%.
The selloff is now spreading to Asia, where Australia’s S&P/ASX 200 has slumped by over 2%.
Hopes that Trump might secure a trade deal with China had driven markets higher in recent weeks; investors are now worrying that America could take a more belligerent approach. Tariffs restrict trade and drag on global growth, so any escalation is bad news for the global economy.
Jasper Lawler of London Capital Group says Trump’s latest barrage of tariffs has surprised the markets.
The US placing steel and aluminium tariffs on Argentina and Brazil caught markets off guard. Traders have had US-China trade tunnel vision. As Americans would say, this came out of left field.
The new tariffs in South America are a reminder that with Trump as US President, a phase one trade deal with China doesn’t mean global trade just resets to the old status quo.
As I type, France is vowing to hit back, so it could be a tense day….
- 9.30am GMT: UK construction PMI for November: Expected to rise to 44.5, from 44.5, showing another contraction