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Date Published: 09/04/2025

Fears of recession mounting as global markets tumble amid tariff war

Spain and the EU are reeling from the new US tariffs and are turning to Asia in search of trade relief

Global financial markets have been rocked by a fresh wave of selling as new tariffs imposed by the United States ripple through Europe, Asia and beyond. A 20% trade tariff on European Union products, now officially in force, has triggered sharp declines across major stock indices, with fears mounting that the escalating trade war could tip the global economy into recession, which could mean more unemployment and lower wages for regular people across the world.

Markets across Europe opened sharply lower following a surge of sell orders, with no sign of recovery by mid-session. Spain’s benchmark Ibex 35 fell as much as 2.5%, sliding below the 11,800-point mark. Other European markets suffered similar losses, with Frankfurt’s DAX dropping 2.89%, Milan’s FTSE MIB down 2.79%, Paris’s CAC 40 off 2.48% and London’s FTSE 100 retreating 2.47%.

The downward trend was set in motion earlier in the day in Asia, where the Nikkei 225 plunged more than 3% following the White House's imposition of 104% tariffs on Chinese imports. This drastic move came after Beijing failed to lift its own 34% tariffs on all US imports, missing an ultimatum issued by Washington. Although Hong Kong’s Hang Seng Index showed a modest recovery, the broader picture remained bleak.

“The market won’t stabilise until we see clarity, either through tariff reductions or signs of resilient economic growth. If neither materialises, profits and investor confidence are set to suffer,” warned analysts at Bankinter.

In Spain, the sell-off was led by steep losses in major stocks. Cellnex Telecom tumbled 5.6%, Grifols dropped 5.07%, Fluidra and Merlin Properties each fell 5.02%, and Amadeus lost 4.83%. Among the country’s largest listed companies, Telefónica declined 3.76%, Banco Santander 2.54%, Iberdrola 2.02%, and Inditex 1.18%. The entire index was in the red, reversing Tuesday’s modest gains on Monday’s dramatic opening.

“The markets are reacting to the breakdown in negotiations, even with countries seen as more open to compromise like Japan, South Korea and Vietnam,” said Renta 4. “The fear is not just about recession, but about rising inflation and tit-for-tat retaliation from trading partners.”

Recession is defined in economics as a period of two consecutive quarters with no economic growth, and the real-world effects it can have include lower employment, lower wages and more failed businesses, though one corollary effect can be that prices of goods go down due to reduced demand.

The fallout from the tariff war, fuelled by US President Donald Trump’s aggressive stance, is already beginning to impact economic projections. The governor of the Bank of Spain, José Luis Escrivá, stated this Wednesday April 9 that its current GDP growth forecast of 2.7% for the year may be revised downward.

“There’s too much uncertainty to provide a definitive figure,” Escrivá said in an interview with RTVE, citing the complexity of assessing the wider consequences of the tariffs.

His comments followed a warning from Economy Minister Carlos Cuerpo, who revealed that 80% of Spanish exports to the United States – worth over €14.8 billion – would be affected by the new tariffs. These include the recently announced 20% EU-wide tariff and the 25% duties already in place on steel and aluminium.

The turmoil extends to the commodities market. Brent crude prices dropped 4.15% to $60.21 a barrel, while US West Texas Intermediate fell 3.71% to $57.37. In just one week, oil prices have plunged more than 20%, driven by fears of a global downturn and a surge in output.

Investors are now closely watching the US Federal Reserve, which is set to release the minutes of its March meeting later today. While the central bank kept interest rates steady at 4.25%–4.5%, President Trump has repeatedly pressured it to cut rates in response to the trade crisis. Fed Chairman Jerome Powell, however, has so far resisted, saying it is too early to determine the appropriate monetary policy response.

Spain turns east in search of opportunity

As the transatlantic trading relationship sours, Spain is pivoting towards Asia to soften the blow. President Pedro Sánchez is currently visiting China and Vietnam in a bid to diversify markets and reinforce economic ties. The trip comes just days after the US introduced a 10% blanket tariff on global imports and an additional 20% specifically targeting EU products.

In response, China announced its own retaliatory measures, slapping 84% tariffs on a range of American goods and pledging to “respond with determination” using its “firm will” and “abundant resources”.

The European Union, meanwhile, is also reassessing its trade strategy, signalling a softer stance towards Beijing as it seeks alternatives to the American market. In Hanoi, Sánchez announced €305 million in loans to support Spanish businesses investing in Vietnam – a clear indication of Spain’s efforts to deepen ties with Southeast Asia.

While the full economic impact of the new tariffs remains uncertain, it is clear that a major reshuffling of global trade relationships is underway. For Spain and its EU partners, the challenge now lies in navigating this new landscape without triggering further economic disruption.

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