The reality of the so-called “retaliatory” tariffs on imports from more than 180 countries announced by US President Donald Trump last Wednesday was worse than investors’ fears, as evidenced by the fall that stock markets took at the end of the week.
Stock prices plunged around the world on Thursday, which intensified on Friday, after China responded by imposing tariffs on imports of US products and controls on exports of certain rare earths to the US. Notably, the decline was greater on Wall Street, with the S&P 500 stock index plunging about 11% in the two-day period and its capitalization decreasing by 5.4 trillion dollars, while the Nasdaq index fell 12%. In Europe, the Stoxx 50 index closed down about 8% over the two-day period.
In addition, the dollar took a beating and the euro appreciated by about 2%, reaching above 1.10 dollars for a time, although its gains were limited on Friday.
The verdict of investors on Trump’s tariff crescendo, with the return of their rates to levels that applied before the World War II, was clear: All economies will be hurt in the foreseeable future, but the biggest victim will be the American economy itself, which is at risk of recession from a global trade war.
This is, perhaps, one of the greatest paradoxes in world history – the government of the world’s largest economy implementing a policy, ignoring all warnings about the suffering that it will cause to itself and to countries that are its long-standing allies.
The estimates of major US banks and other rating agencies are similar, with JP Morgan predicting a 0.3% recession for the US economy this year from 1.3% growth before Trump’s announcements and a surge in unemployment to 5.3%. For the Eurozone, there are also concerns about growth and Barclays estimates that there is a risk of recession in the second half of 2025.
A single rate of 20% was imposed on European Union products, which therefore also applies to Greek products. Greek exports to the US are low, at just 4.8% of the country’s total exports, and concern mainly agricultural products, fuels, steel and aluminum. The direct impact, therefore, on the Greek economy will be small, but the indirect ones will be more significant, due to the negative impact on the economy of key export markets for Greek products, such as Germany, Italy and other European countries.
