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Stocks fall as US tariffs hurt tech the most

Investors rushed to gold, bonds and the yen as stocks plunged on Thursday after U.S. president Donald Trump announced a wall of tariffs that was larger than expected around the largest economy in the world, disrupting trade and supply chain.

China's and Taiwan's manufacturing hubs were hit with new tariffs of more than 30%. This brought the new total to a staggering 54% for imports from China.

Ben Wiltshire, Citi's global rate trading strategist and expert on rates, said that the U.S. tariff rate for all imports is at its highest level in more than a century.

Nasdaq Futures fell 4%, and Magnificent 7 technology leaders lost $760 billion in market value after-hours. Apple shares were down by nearly 7%, as the company produces iPhones in China.

S&P futures dropped 3.3%. FTSE futures declined 1.8%. European futures were down nearly 2%.

Gold reached a record-high above $3,160 per ounce. Oil, which is a proxy of global growth, fell more than 3%, with benchmark Brent futures now at $72.56 per barrel.

Early trade in Tokyo saw the Nikkei down 3.9%, at its lowest level for eight months. Nearly every index member fell as banks, shippers, insurers, and exporters were all hit hard.

Investors braced themselves for a slower U.S. economy, and interest rate futures price in an increased chance of rate cuts in the coming months.

The tariffs were so large and comprehensive that we did not expect them, said Jeanette Gerratty. She is the chief economist of wealth advisory Robertson Stephens, located in Menlo Park, California, the heartland for U.S. technology.

People were discussing whether clarity could boost the market earlier. Now that you've got clarity, no one is happy with what they see.

RISK TO GLOBAL TRADE

Trump announced a 10% import tariff as a starting point, with much higher levies for some trading partners in Asia.

In addition to China's 34% tariff, Japan received a 24% tax, Vietnam 46%, and South Korea, 25%. The European Union received a 20% tax.

South Korea's Kospi dropped 2%. Van Eck's Vietnam ETF dropped more than 8% after-hours. Australian shares fell 2%.

The markets in Taiwan were closed on a holiday.

China's Yuan hit a low of two months in offshore trading, just before the opening onshore. The 10-year Japanese government bonds futures saw their biggest jump in 8 months.

Zhiwei Zhang is the chief economist of Pinpoint Asset Management, Hong Kong. He said that "the tariffs announced today pose a significant risk to global commerce."

The pressure on East Asian supply chains is particularly high.

The U.S. Dollar was higher in rollercoaster forex trade against Asian currencies, except for the safe-haven Japanese yen that rose to 148 yen/dollar.

Trump has also closed a loophole that was used to ship low value packages from China. This is likely to hurt China’s giant online retailers.

Trading partners will likely respond with their own countermeasures that could result in dramatically higher prices.

Tony Sycamore, IG's market analyst, said that the tariff rates announced this morning were far above expectations. If they are not negotiated down quickly, then expectations of a U.S. recession will increase dramatically.

(source: Reuters)