How President Trump's tariffs are reshaping markets and the global economy

The scale and scope of Trump's tariff measures

President Donald Trump's tariffs, imposed on the US's neighbours on 4 March, have significantly impacted financial markets and the global economy.

In early February 2025, President Trump announced substantial tariffs targeting key trading partners, signalling a shift towards protectionist trade policies. These measures, effective from 4 March, include a 25% tariff on all imports from Mexico and Canada, a specific 10% tariff on Canadian energy products, and an increase from 10% to 20% on existing tariffs for Chinese goods. Trading platform users have observed immediate reactions across multiple asset classes since the announcement.

​Market volatility and investor sentiment

Financial markets have experienced increased volatility since the announcement. Major indices such as the Russell 2000, US Tech 100, and US 500 have moved into negative territory for the year, with the US 500 declining nearly 5% from its February peak. The US Tech 100 has experienced a more pronounced drop, falling more than 8% from its mid-February high.

​US indices year-to-date performance

Economic impact on American consumers

The implementation of these tariffs is expected to lead to higher prices for a wide range of consumer goods. The Tax Foundation estimates that the average tariff rate on all US imports would triple from approximately 2.5% to over 7%, reaching a 50-year high. This increase could cost American consumers between $120 billion and $225 billion per year, exacerbating inflationary pressures. Imports from Mexico and Canada constitute a significant portion of the US market for products like fruits, vegetables, automobiles, and energy.

​Global trade implications and international response

Economists warn that these tariffs could disrupt established supply chains and trade relationships across North America. The Peterson Institute for International Economics projects that a sustained 25% tariff could reduce Mexican exports by about 12%, leading to a 4% decrease in its gross domestic product (GDP) for 2025. Canada faces potential economic contraction and job losses, particularly in the automotive and mineral processing sectors.

CFD trading investors are monitoring potential retaliatory measures from affected trading partners. China has already announced a 15% tariff on US chicken, corn, cotton, and wheat, while soybeans, sorghum, pork, beef, fruits, vegetables, seafood, and dairy will face a 10% tariff. These measures will take effect on 10 March. Furthermore, China's Commerce Ministry added 15 US entities to an export control list and 10 firms to an unreliable entity list.

​Monetary policy complications and inflation concerns

The Federal Reserve (Fed) is closely monitoring the tariff situation, as it introduces additional inflationary pressures while potentially slowing economic growth. This combination of factors complicates monetary policy decisions, raising concerns about potential "stagflation." Share dealing investors have noticed traders now anticipate three Fed rate cuts this year, rather than two, with the first expected by June.

Before this week's tariffs were introduced, Treasury Secretary Scott Bessent last week warned about underlying weaknesses in the US economy, contributing to a complex outlook.