Stock markets plunge as UK mulls retaliation over Trump tariffs

Global markets have taken a battering after Donald Trump's tariffs announcement reverberated around the world.

The UK government has drawn up a list of products that could be slapped with import taxes in retaliation, while Scottish businesses have described the US president’s measures as a “major blow”.

On Wall Street, the S&P 500, the Dow Jones and the technology-focused Nasdaq all tumbled as Mr Trump’s sweeping import levies sent shockwaves through world markets.

The president said his plans will bolster production in the US and support home-grown goods, but economists have said the short-term impact will be higher prices and slower growth across the economy.

European and UK markets also saw sharp drops in the aftermath of his speech at the White House on Wednesday night.

The Dax is Germany was down by about 2.8 per cent, the Cac 40 in France had plunged 3.3 per cent by late afternoon, and in the UK, the FTSE 100 was hit a three-month low.

The Federation of Small Businesses (FSB) was one of many groups to raise concerns about the tariffs, despite the UK’s 10 per cent rate being the lowest “baseline” category.

Guy Hinks, FSB Scotland Chair, claimed the tariffs would cause “untold damage” to small businesses.

He told The Scotsman: "These tariffs are a major blow to small Scottish firms trying to trade their way into profit while the domestic economy remains flat. The US is an important market for Scottish exporters, the biggest outside of the EU, with six in 10 small UK exporters currently trading into the United States.

“Scotland’s artisan food and drink makers, from the small distillers to craft bakers, are likely to be among the firms hardest hit. Tariffs will cause untold damage to them.

“We support the push for an agreement between the UK and US governments that brings an end to tariff wars and puts SMEs at its centre by reducing non-tariff barriers.

“The UK Government should be ready to provide emergency assistance to any SMEs at risk of collapse. This will provide breathing space, help contain the fallout - protecting jobs and their suppliers - and allow firms a bridge as they adapt.”

The UK exported £60.4 billion of goods to the US in 2023, around 15 per cent of all goods exports.

While the blanket 10 per cent tariff will come into effect on Saturday, the car industry has already been hit with a 25 per cent import tax which began in the early hours of Thursday morning.

The Scotch whisky industry is also likely to be impacted, with America its largest export market by value. In 2024, US exports were worth £971 million to the industry.

The industry has now urged the UK government to keep working on an economic deal with the US to see the tariffs ditched.

A SWA spokesperson said: "The industry is disappointed that Scotch whisky could be impacted by these tariffs. We welcome the intensive efforts by the UK government to reach a deal with the US administration, and we continue to support this measured and pragmatic approach towards a mutually beneficial resolution.”

Concerns were also raised by William Wemyss, founder and chair of Wemyss Family Spirits, a small independent Scotch whisky producer based near St Andrews.

He said: “The reintroduction of a 10 per cent tariff on UK exports to the US, including Scotch whisky, is a damaging setback for our industry. As a small, family-owned Scotch whisky business, we rely on stable, tariff-free trade to grow, invest and bring our products to whisky lovers across the Atlantic.

"The US is our single largest export market and demand remains strong, but tariffs inject real uncertainty, particularly for independent producers like us. If tariffs fuel inflation or restrict consumer spending in the US, it risks fewer golf travellers, fewer distillery visits, and a knock-on effect on local jobs.”

Prime Minister Sir Keir Starmer has acknowledged there will be an economic hit for the UK from the 10 per cent import tariff on British goods entering the US.

Ministers have said they will keep working towards a trade deal with the US, but Sir Keir stressed that "nothing is off the table" in terms of a response.

In the House of Commons, Business Secretary Jonathan Reynolds told MPs that businesses will be asked for their view on how they will be hit by any UK measures striking back at Mr Trump's global trade policy.

Mr Reynolds said: "It remains our belief that the best route to economic stability for working people is a negotiated deal with the US that builds on our shared strengths.

"However, we do reserve the right to take any action we deem necessary if a deal is not secured.

"To enable the UK to have every option open to us in future, I am today launching a request for input on the implications for British businesses of possible retaliatory action.

"This is a formal step, necessary for us to keep all options on the table.

"We will seek the views of UK stakeholders over four weeks until May 1 2025, on products that could potentially be included in any UK tariff response.

"This exercise will also give businesses the chance to have their say and influence the design of any possible UK action.

"If we are in a position to agree an economic deal with the US that lifts the tariffs that have been placed on our industries, this request for input will be paused, and any measures flowing from that will be lifted."

Mr Reynolds said the Government had drawn up an "indicative list of potential products that the Government considers most appropriate for inclusion" in any tariffs against US exports.

The list includes key US products such as Bourbon whiskey, motorcycles, guitars and jeans but also includes scores of other items ranging from whale meat to chopsticks.

Officials said the list covered 27 per cent of the value of total imports from the US and excluded the main American products which British companies depend upon.

Addressing senior executives from some of the UK's biggest companies in Downing Street, Sir Keir said: "Clearly, there will be an economic impact from the decisions the US has taken both here and globally."

He said that "nobody wins in a trade war" and stressed the UK had a "fair and balanced trade relationship with the US".

Negotiations on an "economic prosperity deal" which it is hoped could mitigate the impact of the tariffs will continue, Sir Keir said as he promised to "fight for the best deal for Britain ".

But he said he would "only strike a deal if it is in the national interest and if it is the right thing to do for the security of working people".

There was a degree of relief in the Government when the 10 per cent rate applied to the UK was less than that applied to other nations.

The EU is facing tariffs of 20 per cent, while Japan's tariff rate is 24 per cent.

The UK exported £60.4 billion of goods to the US in 2023, around 15 per cent of all goods exports.

While the blanket 10 per cent tariff will come into effect on Saturday, the car industry has already been hit with a 25 per cent import tax which began in the early hours of Thursday morning.

WASHINGTON, DC - APRIL 02: U.S. President Donald Trump holds up a chart while speaking during a “Make America Wealthy Again” trade announcement event in the Rose Garden at the White House on April 2, 2025 in Washington, DC. Touting the event as “Liberation Day”, Trump is expected to announce additional tariffs targeting goods imported to the U.S. (Photo by Chip Somodevilla/Getty Images)

A group of analysts for Barclays said there was a "high risk that the US economy enters a recession this year" in a note published on Thursday.

Inflation is predicted to rise and gross domestic product (GDP) to decrease - which raises the risk of so-called "stagflation" in the economy.

Barclays also said that, if a recession kicks in, firms could announce large-scale layoffs which would send the country's unemployment rate higher.

Chris Beauchamp , chief market analyst for online trading platform IG, said: "The key feature of the last two years and more has been the resilience of the US economy.

"Trump's tariffs, along with the government job cuts and the potential for massive spending cuts, seem doomed to kill the goose that laid the golden egg.

"Of course Trump and his team hope that their tax cuts and deregulation agenda can create a bounceback that will shock and awe the world, but the pain that has to come first is likely to be brutal for equity markets worldwide."