Stock markets extend losses over US tariffs, recession fears

London: Global stock markets extended losses on Tuesday after President Donald Trump doubled planned tariffs on Canadian steel, aggravating concerns his trade policies could push the United States toward recession.

In New York, the Dow index of blue-chip stocks was down 1.2 percent in midday trading while the broad-based S&P 500 shed 0.8 percent.

The tech-heavy Nasdaq dipped 0.3 percent, though Tesla and Amazon staged rebounds a day after the index closed four percent lower in its worst session since 2022.

Europe's main indices ended the day in the red, as did most in Asia.

"Markets are jittery and volatility seems like the only certainty while the White House pushes hard to usher in a new era, seemingly happy for stock markets to be collateral damage," said Matt Britzman, senior equity analyst at Hargreaves Lansdown.

Traders had initially welcomed Trump's election win in late 2024, optimistic that his promised tax cuts and deregulation would boost the world's biggest economy and help equities push to further record highs.

But there is growing concern that tariffs against key trading partners will reignite inflation, forcing the Federal Reserve to again start raising interest rates and triggering a recession.

Since taking office in January, Trump has announced sweeping tariffs on imports from Canada, Mexico and China, though he had allowed a partial and temporary rollback for the two US neighbours.

Tariffs on steel and aluminium are due to take effect on Wednesday, affecting a wide range of producers from Brazil to South Korea and the European Union.

But Trump announced Tuesday that he was doubling the tariffs on Canadian steel and aluminium to 50 percent in response to the Canadian province of Ontario imposing of a 25 percent surcharge on electricity exports to three US states.

Shares in carmakers GM, Ford and Stellantis -- big consumers of steel and aluminium -- all tumbled.

Analysts said investors were also concerned that Trump appears more willing to see stock markets fall than during his first term in office, after he said the economy was facing "a period of transition" and refused to rule out the risk of recession.

"The problem for markets is that this is a man-made crisis," said Kathleen Brooks, research director at the trading platform XTB.

Trump's "'bull in a china shop' approach to economic policy has spooked investors. The question is, will it continue to spook consumers, the life blood of the US economy," she said.

Investors will also keep a close eye on US consumer inflation data on Wednesday, as it could influence the Fed's next move.