US dollar hits three-month low as trade war sparks ‘Trumpcession’ fears, and FTSE 100 slides – business live
US dollar weakens amid rising ‘Trumpcession’ fears
The US dollar is weakening today, amid growing concerns that Donald Trump’s policies could push America’s economy into a contraction, and possibly a full-blown recession.
The dollar index, which tracks the greenback against a basket of rival currencies, has dropped by 0.44% today, as traders anticipate that a trade war will drive up US inflation and hurt its economy.
Sterling has risen 0.2% to $1.2724 against the dollar, its highest level since 17 December. The euro is up 0.3% at $1.052.
The dollar’s weakness comes as markets now expect the US Federal Reserve to cut interast rates three times this year. In January and February, only one or two cuts were priced in.
Investors are jumpy after a closely watched gauge of the US economy weakened yesterday.
The Atlanta Federal Reserve’s GDPNow model now estimates US GDP will shrink at an annualised rate of 2.8% in January-March, the equivalent of a 0.7% quarterly decline in activity. That helped to prompt yesterday’s losses on Wall Street.
That helped to prompt yesterday’s losses on the US stock market, even though the Atlanta Fed GDPNow can be volatile.
Kyle Rodda, senior financial market analyst at Capital.com, explains:
Wall Street tumbled off the back of the news, while the US Dollar declined as market participants began to contemplate the risks of a US recession. While much of the change is due to mechanical factors in the way GDP is calculated, a deepening trade deficit along with signs of weaker consumer spending and business activity has driven the Atlanta Fed’s GDP Nowcast to -2.8%.
Subsequently, the markets have shifted forward expectations of the next Fed rate cut to June, with May increasingly looking like a “live” meeting.
Talk of a “Trumpcession” has been growing in recent days, after the latest trade data last week showed a surge of imports as businesses tried to avoid new tariffs.
Manufacturing data yesterday showed a slowdown in US factory growth in February, with employment levels and new orders both contracting.
An index of US consumer confidence hit an eight-month low last month, while US retail sales dropped by the most in nearly two years in January.
A CBS News poll released on Sunday showed that 49% of Americans disapprove of president Trump’s handling of the economy.
Stephen Innes, managing partner at SPI Asset Management, says talk of a ‘self-inflicted “Trumpcession.”’ is on the rise:
Already queasy from a fading AI-driven rally, Wall Street is now staring down a worsening cocktail of Trump’s tariff fury, stretched equity valuations, and the cold, hard realization that the U.S. economy may be losing steam. Meanwhile, across the pond, Europe—long the ugly duckling of global markets—is suddenly the belle of the ball.
While America grapples with an economic hangover, European stocks are ripping higher, fueled by a mix of bargain-hunting, fiscal policy shifts, and the tantalizing prospect of a peace deal in Ukraine. The euro and bond yields are climbing, while the dollar and Treasuries slump—proof that global capital is rebalancing. Defence and infrastructure spending is setting the tone for a European revival, while Washington is left debating whether it’s about to stumble into a self-inflicted “Trumpcession.”
A recession, though, would mean two quarterly contactions in GDP in a row – which Paul Ashworth, chief North America economist at Capital Economics, doesn’t see happening.
He wrote last week:
Following the 0.5% m/m slump in real consumption in January and the massive 10% m/m surge in real goods imports, we now expect first-quarter GDP to contract by 1.0% annualised. Assuming that surge in imports reflects the front-running of tariffs, however, it should be more than reversed in the second quarter, when we expect GDP to rebound by 4.5% annualised.
The upshot is that a “Trumpcession” should be avoided and there is no need for the Fed to cut interest rates.
Key events
There are heavier losses across European stock markets tonight.
Germany’s DAX has racked up a 3.5% fall, on fears that tariffs will hurt its industrial base.
France’s CAC lost 1.85%, while Italy’s FTSE MIB slumped by 3.4% today.
Simon Sutcliffe, Customs & Excise duty partner at audit, tax and business advisory firm Blick Rothenberg, says the ominous signs of an emerging full-blown trade war are on the horizon, adding:
“The EU and UK are waiting in trepidation, for their turn to come.
The mixing of politics, US domestic economics and the ongoing Ukraine conflict has coloured the US President’s decision-making process. Europe’s recent actions in support of Ukraine will likely have been viewed as a catalyst for wholesale tariffs to be considered anew on the EU and possibly the UK, even after the next round of worldwide tariff measures hit in the next few weeks.”
FTSE 100 posts biggest drop since last October
The launch of a trade war between the US and Canada, Mexico and China has triggered the biggest drop on the London stock market this year.
The FTSE 100 index of blue-chip companies has closed for the night, down 112 points or 1.27%, at 8,759 points – a day after hitting its record high.
That’s the biggest daily drop on the ‘Footsie’ since 8 October last year.
Oil companies such as BP (-5.7%) banks including Barclays (-6%) and investment groups including Scottish Mortgage Investment Trust (-6.2%) and Polar Capital Technology Trust (-5.9%) were among the fallers.
Trudeau: absolutely no justification for tariffs
Canada’s prime minister, Justin Trudeau, has just blasted Donald Trump over the tariffs which were imposed on Canadian imports to the US today.
Trudeau says that today, the US launched a trade war against Canada – their “closest partner and ally, their closest friend”.
“At the same time, they’re talking about working positively with Russia, appeasing Vladimir Putin – a lying, murderous, dictator. Make that make sense.”
Trudeau says there’s “absolutely no justification or need” for the tariffs, and warns that the trade war will “first and foremost harm American families”.
This will sabotage the Trump agenda of creating a “New Golden Age” for the United States, Trudeau says.
Addressing Americans, Trudeay says it is “totally false” to claim that Canada is not willing to help in the fight against illegal fentanyl.
The border is already safe and secure, he says, pointing out that less than 1% of fentanyl imports or illegal crossings to the US come from Canada. Even so, he says Canada introduced a new programme to police the border, to respond to Trump’s concerns.
Trudeau also confirms that Canada imposed 25% tariffs on C$30bn worth of US imports immediately, and will extend this to a further C$125bn in 21 days’ time.
BREAKING: Canadian PM, Justin Trudeau announces his response to US tariffs coming into effect today, by implementing “25% tariffs against $155 billion worth of American goods”
Latest ➡️ https://t.co/PAiZ4D1jU3
📺 Sky 501, Virgin 602, Freeview 233 and YouTube pic.twitter.com/lImpQ8i6n3
— Sky News (@SkyNews) March 4, 2025
Update: Trudeau also argues that Trump’s tariffs are “a very dumb thing to do”.
He says:
“Now, it’s not in my habit to agree with the Wall Street Journal, but Donald, they point out that even though you’re a very smart guy, this is a very dumb thing to do. We two friends fighting is exactly what our opponents around the world want to see.”
This is proving to be a volatile week for German investors.
Yesterday, the DAX index – which contains the largest German companies – hit a record high.
Today, it’s now slumped by 3.3%, a heavy fall, on fears that its industrial companies will suffer from a global trade war.
Auto parts maker Continental are still the top DAX faller, now down over 12%. It has said today it will try to pass on the cost of tariffs imposed by US President Donald Trump to its customers….
Konstantin Oldenburger, market analyst at CMC Markets, says:
The headlines surrounding an impending global trade war have become too loud to ignore on the once-booming trading floor of Frankfurt. Since nearly two-thirds of DAX companies generate their revenues outside the US, and with cyclic sectors like automotive and manufacturing being heavily represented, the index remains highly dependent on global trade. Consequently, any significant disruption from a worldwide trade war poses a substantial threat.
Continental’s warning of a lackluster year in 2025, marked by weak domestic car demand and trade tensions, brought these concerns directly home.
Whether factors such as artificial intelligence, pricing power, a more business-friendly government, and companies like Rheinmetall can shield the index from a larger correction remains to be seen. However, the sounds of trade disruptions are growing louder and are becoming increasingly difficult to ignore, even though Trump has yet to impose any direct tariffs against Germany or the European Union.
BlackRock buys Panama Canal ports amid Trump pressure
As well as launching trade wars and cutting support for Ukraine, Donald Trump has also been dropping heavy hints since entering the White House that he wants control of the Panama Canal.
Last month, he accused China of controlling the 82km (51-mile) canal, apparently a reference to the fact that there is a port at either end of the canal that is operated by a Hong Kong-based company.
Well, that’s just changed!
In a surprise move, CK Hutchison Holdings Ltd, the Hong Kong-based conglomerate, has agreed to sell those ports to US investment giant BlackRock.
BlackRock is acquiring Hutchison’s 90% stake in Panama Ports Company, which owns and operates the ports of Balboa and Cristobal in Panama. It is also buying 80% of the Hutchison Ports group, which operates 43 ports in 23 countries, in a deal worth over $19bn.
BlackRock’s CEO, Larry Fink, says:
These world-class ports facilitate global growth. Through our deep connectivity to organizations like Hutchison and MSC/TIL and governments around the world, we are increasingly the first call for partners seeking patient, long-term capital. We are thrilled our clients can participate in this investment.”
According to CK Hutchison’s co-managing director, Frank Sixt, the deal was competed after a “rapid, discrete but competitive process”.
Sixt insists that political pressure did not play a part (!), saying:
I would like to stress that the Transaction is purely commercial in nature and wholly unrelated to recent political news reports concerning the Panama Ports.
It must be noted that, however, the Transaction does remain subject to confirmatory due diligence, settlement of definitive documentations, and normal and usual completion procedures, adjustments and conditions as well as compliance by HPH with the rights of minority shareholders under existing shareholders agreements relating to the Sold HPH Interests.
Donald Trump’s trade wars could be bad for consumers (higher prices) and businesses (lower sales), but they could also keep lawyers busy.
Ben Knowles, partner at global law firm Clyde & Co , predicts a flurry of litigation between companies over existing contracts:
“From a legal and contractual perspective, tariffs of this scale will fundamentally alter the economic viability of existing agreements. As we’ve seen with past trade disputes, businesses affected by sudden tariff hikes may turn to litigation, seeking to renegotiate or exit contracts that are no longer commercially sustainable.
The coming months could see a wave of disputes raised as companies grapple with the impact of shifting trade policies.”
Reeves: UK will be hurt by trade war
Richard Partington
Rachel Reeves has warned Britain’s economy will be hurt by Donald Trump starting a G7 trade war even if Donald Trump exempts the UK from tariffs.
The chancellor said a global slowdown in trade would hit UK growth and said she was pushing hard to make the case for free trade.
“It’s absolutely the case that even if tariffs aren’t applied to the UK, we will be affected by slowing global trade, by a slower GDP growth and by higher inflation than otherwise would be the case,” she told a conference in London hosted by the manufacturing trade group Make UK.
Reeves explained:
“I’ve always been really clear that I believe strongly that free trade is good for exporters and importers for both countries on the sides of a trade deal. So I don’t want to see tariffs increased. I don’t think it serves anyone well.”
She was speaking as Trump’s decision to go ahead with sweeping tariffs on imports from Canada, Mexico and China rattled financial markets, amid growing fears over an escalating global trade war.
Reeves said she hoped the UK would be able to secure a trade deal with the White House to avoid the heaviest impact on British firms.
“I think there’s every reason to be hopeful about coming to some sort of a trade deal,” she said, adding:
“I’m not naive. This is not going to be an easy thing to secure for reasons that we all understand. There will have to be give and take on both sides. We absolutely recognise that, but I do think there’s a big opportunity here.”
S&P 500’s post-election gains are wiped out
The selloff on Wall Street is gathering pace – after half an hour’s trading, the S&P 500 is down 1.5%, losing 89 points to trade at 5,760.
That takes the S&P 500 share index back down to its levels just before last November’s election, meaning the Trump Bounce has been erased.
*S&P 500 ERASES ELECTION GAIN, WIPING OUT $3.4 TRILLION IN VALUE
— Joe Weisenthal (@TheStalwart) March 4, 2025
RBC’s McKay warns of hit to economic growth from US tariffs
The boss of Royal Bank of Canada has warned that the trade war with the US will hurt growth.
Dave McKay told investors at a conference in New York that he hopes the tariffs will be temporary, saying (via Bloomberg):
“It’s a little frustrating to see the loss on momentum.
“We still hope for the best outcome that these tariffs are short-lived and we get back onto a growth agenda on all sides of the border that we were on before.”
McKay, who runs Canada’s largest bank, warned that the threat of tariffs has been hitting growth this year, saying:
“That narrative from January to today and to last night has had immediate impact on the psychology of consumers, psychology of small businesses and the psychology of large corporates.
We saw housing starts start to slow and we saw consumption start to slow on both sides of the border.”
US financial stocks are sliding in early trading, pulling the S&P 500 banks index down by 3.4%.
Goldman Sachs are down 4.6%, with JP Morgan Chase losing 3.5%. American Express has lost 3.3%.
Investors may be concerned that a trade war will hurt US businesses, leading to more bad debts.
The rising expectations that the Federal Reserve will cut US interest rates three times this year are also a factor – lower interest rates eat into bank profits.
Wall Street drops in early trading
Wall Street has opened in the red at the start of trading.
The Dow Jones industrial average, the wider S&P 500 share index, and the tech-focused Nasdaq are all down around 1% in early trading in New York.
That adds to their losses yesterday, after Donald Trump announced he was pressing ahead with tariffs on Canada, Mexico and China, ratching up his trade war.
Investors can now react to the news that China has announced retaliatory tariffs on a range of agricultural imports from the US next week – including 15% tariffs would be imposed on chicken, wheat, corn and cotton, and 10% tariffs on sorghum, soybeans, pork, beef, aquatic products, fruits, vegetables and dairy products.
Reuters points out that the Nasdaq Composite index is on course to confirm a fall into a correction (ie, down 10% from its record closing high).
Major US retailers warn Americans will pay more because of Trump’s trade war with top partners, report says
Chris Stein
The CEOs of two large retailers in the United States say shoppers are likely to see prices rise as a result of the tariffs Donald Trump placed on Canada and Mexico, and his hike in levies on China.
The warnings from the CEOs of Best Buy and Target, reported by CNBC, contradict the president’s assertion that the costs of his trade war will not be borne by US consumers, who rebelled against his predecessor Joe Biden after the US economy was hit by its worst bout of inflation in decades.
“Those are categories where we’ll try to protect pricing, but the consumer will likely see price increases over the next couple of days,” Target CEO Brian Cornell told the network in an interview.
“If there’s a 25% tariff, those prices will go up.”
More here, in our US Politics Live blog.
Mexico’s president condemns U.S. tariffs and promises retaliation
Mexican president Claudia Sheinbaum has said said there was no justification for U.S. President Donald Trump’s 25% tariffs on imports from Mexico and said her government would respond with tariff and non-tariff measures.
Sheinbaum told her regular morning press conference.
“There is no reason, rationale or justification to support this decision that will affect our people and nations … Nobody wins with this decision.”
Speaking hours after new 25% tariffs on Mexico kicked in, Sheinbaum said Mexico had collaborated with the U.S. on migration, security and anti-drug trafficking.
She says:
“In these 30 days, decisive actions were taken against organized crime and fentanyl trafficking, as well as bilateral meetings on security and trade.”
Sheinbaum said she would give details on Mexico’s response, including retaliatory tariffs, at an event in the capital’s iconic Zocalo square on Sunday.
As flagged earlier, the Mexican peso has hit a one-month low against the US dollar.
European markets slide deeper into the red
European stock markets have dropped deeper into the red, as investors fret about worsening trade relations.
In London, the FTSE 100 index is now down 79 points, or 0.9%, at 8792 points, further from yesterday’s record high.
The selloff in German auto stocks has now pulled the DAX down by 2.8% in Frankfurt, while France’s CAC index is down 1.9%.
“Donald Trump forged a reputation for being Mr Unpredictable during his first term as US president. This time he’s on a mission to do something dramatic on a daily basis and markets continue to be taken aback by the pace and ferocity of his decisions. He is sending a clear message to the world: ‘Don’t mess with Donald’,” says Russ Mould, investment director at AJ Bell.
Mould adds:
“Investors were desperately hoping that Trump would delay tariffs on Canada, Mexico and China at the eleventh hour, yet the US president has stuck to his guns and brought them into power. Naturally, the recipients have started to retaliate and that has raised the prospect of a full-blown trade war.
“Investors knew there was a real chance this would happen but quietly hoped it would all go away and simply be Trump having a bark worse than his bite. Not this time around.
“Layered on top is Trump’s decision to pause US military aid to Ukraine showing you’ve got a political leader who is determined to show the world who’s boss.
Fears that the US economy could fall into stagflation are “overblown”, argues Atakan Bakiskan, US economist at Berenberg bank.
Markets seem to be gradually pricing in a scenario where growth significantly slows, and inflation remains elevated. Tariffs, rising uncertainty, federal layoffs, and weak macroeconomic data have all contributed to these growth concerns. The 10-year Treasury yield has fallen by more than 60 basis points from its 4.8% peak in mid-January, currently standing at 4.14%.
The equity market (S&P 500) has retreated by nearly 5% from its mid-February peak. The futures and swaps markets now expect three rate cuts by the end of 2025, compared to pricing in one cut at the beginning of the year. Investor sentiment is the most bearish since September 2022 (according to the American Association of Individual Investors), and the CNN Fear & Greed Index has dropped into “extreme fear” as risk-on sentiment collapsed. The Russell 2000, comprised of highly import-dependent small businesses, is down nearly 6% year-to-date.
The market is correct that inflation will remain sticky, but recent concerns about a sharp slowdown in the US are misplaced, in our view. Income-driven strong consumer spending and expansionary fiscal policy—the underlying drivers of the US economy—remain intact.
Bessent: Chinese manufacturers will eat the tariffs
U.S. Treasury Secretary Scott Bessent has claimed that Chinese manufacturers will swallow the US tariffs that were imposed overnight.
Speaking to Fox News, Bessent declared:
“China’s business model is export, export, export, and that’s unacceptable. I am highly confident that the Chinese manufacturers will eat the tariffs, prices won’t go up.
[It is not clear that this will happen, though. The argument is that a Chinese exporter would cut their sale price by around 10%, so that the price paid by an American customer wouldn’t change. But they might not want to suffer that financial hit, or even be able to…
Bessent also suggested that the US was in the “middle of a transition” regarding tariffs on Canada and Mexico.
Dollar at three-month low
The pound is continuing to climb against the US dollar, and is now up half a cent at $1.2746, its strongest level since mid-December.
The dollar index, which tracks the currency against six peers, is trading at a three-month low too, down 0.75% today.
China says it has filed additional complaints with WTO against U.S. tariffs
China says it had raised additional complaints with the World Trade Organization after U.S. President Donald Trump imposed extra duties on Chinese goods.
In a statement emailed to journalists, China’s mission to the WTO in Geneva says:
“China has raised WTO complaints against the United States’ newly imposed tariff measures.”
