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Unpicking the financial market fallout from Trump’s tariffs

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The impact of Donald Trump's recent reciprocal tariffs on the financial markets has not only been economically significant, but a stark reminder of the great depression of the 1930s and the Wall Street crash.

However, the fall in stock markets across the globe this week has been surprisingly large across two consecutive days. Surprising because the measures had already been announced for some time.

So, what could be the reasons for the sudden market plunge? There could be many, but let’s explore one of the main causes. In spite of the announcements taking place last week, the financial markets could not quickly form a view on the expected impact.

Looking at the UK and London – which, in the eyes of many is one of the largest and most important financial markets in the world – it seems that it was difficult to make a coagulated view on just where the shock would take price levels due to data.

Investors and bankers, loosely speaking, need reliable information on which to base their forecasts. But recently we learnt that, at least in the UK (but probably also the case elsewhere), the Office for National Statistics (ONS) needs to revise most of its internal data gathering and processing procedures.

So, it is not possible to know most of the things you will take as inputs into some line of thinking. No matter what school of thought one may belong to, you are bound to be uncertain of the likely impact and what is to come next. This uncertainty leads to everybody waiting and then counting the damage.

On the flip side, it is also tempting to say that there are opportunities to come out of the current market turmoil. Trillions of dollars came into Europe in last few weeks and months looking for some kind of safety. There are many academic studies that point to now being the optimum time to buy stocks, bonds or commodities. That’s because the market is – most of the time – over sensitive when it falls big first time, then there is some quick recovery immediately afterwards.

But without any reliable data it is a bit heroic to say that the sea is calm because there is a lot of fog around and we cannot see the full impact of what might be ahead. After all, the Titanic was big and powerful but so was the iceberg that loomed ahead. The question is, is the US the Titanic or the iceberg?

Published 7 April 2025
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Leading insights

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