Aurelia Butler

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Nvidia is facing its first real competitor in China. US export controls, designed to cut off China’s access to advanced chips and chipmaking gear, were supposed to ensure that no domestic rival could emerge. But the very sanctions meant to shut down China’s chipmaking sector have instead fuelled it, accelerating the rise of an unexpected challenger: Huawei.The paradox is clear — had the US never imposed chip export bans, the Chinese conglomerate would have continued to rely on Taiwan Semiconductor Manufacturing Company for its chips. Chinese chips would have probably remained second-tier, reliant on foreign technology with little urgency to innovate. Instead, by sanctioning Huawei and cutting it off from advanced US chips, Washington has become the greatest driver of the technological self-sufficiency it sought to prevent.Huawei together with Chinese chipmaker SMIC — which is also under US sanctions — has made a key breakthrough in chipmaking, improving the yield of its latest AI chips to about 40 per cent, doubling from 20 per cent a year ago.Yield, the percentage of functional chips in a batch without defects, is a critical metric in chipmaking. Defects in chips are inevitable, especially in advanced chips. Shrinking transistor sizes and complex chip designs raise failure rates. Even slight variations in production and impurities in materials can cause malfunctions. Advanced chips are built in multiple layers, where misalignments add another layer of risk. Therefore, yields of between 30 and 40 per cent are common for new chip production lines, improving significantly as manufacturing is refined. Huawei reaching this crucial threshold — despite limited access to advanced fabrication tools — marks a turning point for its AI chip business, with the higher yields making its production line profitable for the first time.Challenges remain. Nvidia’s dominance is reinforced by its deeply entrenched software ecosystem and developer base, making a shift to alternatives difficult. Meanwhile, local chipmakers’ access to advanced manufacturing gear remains limited, meaning less efficient fabrication. Performance is another concern. Critics argue that Huawei’s chips lag behind Nvidia’s in performance per unit.However, a fundamental shift in the AI sector could work in Huawei’s favour. AI can be categorised into two markets: training — where AI models are created; and inference — where they are deployed to generate real-world responses. While training happens once, inference happens billions of times in real-world use. This shift towards inference-heavy workloads marks the next stage of competition for chip companies.For example, creating AI models such as OpenAI’s GPT-4 uses high-performance training chips. But once trained, deploying it to users requires a far greater number of lower-power inference chips. As AI inference becomes more prevalent, demand for cost-efficient chips will increase. In China, where AI chips are in short supply, Huawei may have an edge despite trailing Nvidia in performance. Scaling up the number of chips could help bridge this gap. Parallel processing allows multiple chips to work together, distributing the workload and combining results for the final output.Chinese tech giants such as Baidu and ByteDance are shifting to Huawei’s AI chips for deep-learning workloads, potentially setting a precedent for other countries seeking non-Nvidia alternatives.But the broader battle over chips extends far beyond Huawei. China, the largest chip consumer in the world, is a market Nvidia cannot afford to lose. Analysts estimate that last year alone, Nvidia made $12bn from 1mn H20 AI chips sold to China. That a single product generated revenue equivalent to nearly a tenth of the company’s annual total underscores how critical the Chinese market remains to Nvidia.Yet Washington’s greatest miscalculation may not be underestimating China’s chipmaking capabilities, but rather overlooking the forces that drive technological progress. History has shown that every industrial power that has tried to suppress a rival’s technological rise has, at best, delayed it — and at worst, accelerated it. Chips are no exception. The chip war is far from over, but in the long run, the US may have ensured that it is a war China cannot lose.june.yoon@ft.com More

Wall Street stocks fell for the second day in a row on rising concerns Donald Trump’s tariffs will deal a blow to the US economy. The blue-chip S&P 500 was down around 0.9 per cent on Tuesday afternoon, while the tech-heavy Nasdaq Composite dipped 0.2 per cent. The S&P 500 briefly on Tuesday fell below the November 5 closing price, meaning the gauge had wiped out all of its gains since the election. But it recovered slightly above those levels later in the session. Stocks had initially rallied after Trump’s election victory, with investors betting that his promise of tax cuts and looser regulation would boost corporate profits.As recently as two weeks ago, the S&P was at an all-time high, up more than 6 per cent since the vote.However, those gains have since been largely erased as investors fret that the impact of Trump’s aggressively protectionist trade policy will hurt the US economy.On Tuesday, the US imposed 25 per cent tariffs on Canada and Mexico, and an additional 10 per cent levy on China. All three countries indicated that they intended to take retaliatory measures in response, escalating fears of a trade war. More

US farmers reacted with fury to President Donald Trump’s tariffs on imports from Canada, Mexico and China, saying a trade war will threaten their markets, push up the cost of inputs such as fertiliser and “take a toll on rural America”.Farmers expressed particular concern about the impact of retaliatory tariffs, saying they will restrict their access to some of the US’s most important export markets for staples including corn, soyabeans, red meat and pork, and urged Trump to negotiate a swift end to the conflict.“Contrary to what the president thinks, this means nothing but pain,” said Aaron Lehman, head of the Iowa Farmers Union. “Our domestic markets aren’t prepared to pick up the slack and that means lower prices for what we grow.”Washington moved on Monday to hit most Canadian and Mexican imports with 25 per cent tariffs, and outlined plans to double levies on Chinese products. Beijing responded by threatening 10 per cent to 15 per cent tariffs on US agricultural goods, ranging from soyabeans and beef to corn and wheat, from March 10. Canada also said it would impose levies on US imports, and Mexico said it would follow suit. Farmers fear the frictions will cause unnecessary harm to a sector struggling with what National Corn Growers Association president Kenneth Hartman Jr called “a troubling economic landscape” because of depressed commodity prices.“Farmers are frustrated,” said Caleb Ragland, American Soybean Association president. “Tariffs are not something to take lightly and ‘have fun’ with.”“Not only do they hit our family businesses squarely in the wallet, but they rock a core tenet on which our trading relationships are built, and that is reliability,” he added.Sector leaders warned that countries such as Brazil were well positioned to step in if trade tensions prompted importers to turn their backs on the US and seek alternatives.Brazil and other soyabean producers were expecting abundant crops this year, Ragland said, and “are primed to meet any demand stemming from a renewed US-China trade war”.Joe Schuele, vice-president of the US Meat Export Federation, said: “A lot of times, people will associate trade tensions with the various governments, but what we’re really impacting here are business relationships that have taken years, in some cases decades to build.”“Exports have been a real driver that have kept the US meat and livestock sectors thriving at a time when a lot of agriculture is hurting.”Analysts said China has long sought to diversify away from US agricultural goods such as soyabeans and that the latest round of the trade war will only entrench that trend.Arlan Suderman, chief commodities economist at broker StoneX, said China had recently begun to favour soyabean imports from countries with weaker currencies and more favourable exchange rates than the US such as Brazil.“The dollar being so strong, that has really been pricing US commodities out for a number of years,” he said. “Right now, it’s 70 cents per bushel cheaper to get soyabeans from Brazil than the US Gulf.”US ranchers, who export roughly 10 per cent of their pork production to Mexico, say they will also lose out to their rivals in Brazil, Chile and Argentina.“This gives our customers an incentive to look elsewhere,” said Schuele. “We believe that the quality of US meat sets us apart from our competitors but, at some point, even the most loyal customer is going to have to start looking at alternatives.”Some content could not load. Check your internet connection or browser settings.Losing market share in Mexico will make it more difficult for US ranchers to produce bacon and ribs for domestic markets because they rely on Mexican meat processors to purchase their other, less-popular cuts. That will eventually raise prices for US consumers, said Schuele.Zippy Duvall, head of the American Farm Bureau Federation, said that while farmers supported Trump’s goals of ensuring security and fair trade with other nations, the additional levies, combined with the expected retaliatory tariffs, “will take a toll on rural America”.“For the third straight year, farmers are losing money on almost every major crop planted,” he said. “Adding even more costs and reducing markets for American agricultural goods could create an economic burden some farmers may not be able to bear.”Farmers fear the same negative impact as Trump’s last trade war, with China in 2018, which led to $27bn in losses for US agriculture, according to estimates by farming groups, though farms received as much as $23bn in compensation from the federal government for the trade disruptions.  This time, however, the sector is less well-prepared: commodity prices are down almost 50 per cent from three years ago and costs for inputs such as seeds, pesticides and fertiliser are higher.Fertiliser might become even more expensive. About 80 per cent of US supplies of potash come from Canada, the world’s largest producer. Such imports will also be hit by Trump’s tariffs.Nutrien, one of Canada’s largest potash producers, said the company had moved “as much potash south of the border as possible ahead of the spring planting season”.“While we will continue to serve our US customers, the cost of tariffs would ultimately be borne by US farmers,” the company said.US shoppers are also expected to suffer as a result of higher prices for imported fruits and vegetables such as Mexican avocados. “Costs will have to be absorbed because someone has to pay, and a significant part will be passed along to consumers,” said Rebeckah Adcock, of the International Fresh Produce Association, a trade body. Additional reporting by Susannah Savage More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldUS stocks on Tuesday wiped out all of the gains accumulated after Donald Trump’s election, after the president’s tariffs on Washington’s biggest trading partners sparked fears of serious damage to the global economy.The S&P 500 — which hit a record high less than two weeks ago — closed down 1.2 per cent on Tuesday, below its November 5 level, in a session marked by violent swings.The tech-heavy Nasdaq Composite closed 0.4 per cent lower, having recovered some of its earlier losses.The moves came after Trump’s 25 per cent tariffs on imports from Mexico and Canada took effect on Tuesday, triggering outrage from the US’s neighbours and stoking fears of a trade war.The White House also imposed an additional 10 per cent levy on goods from China, on top of last month’s 10 per cent tariff, as the president’s protectionist policies fuelled investor concerns over a worldwide economic slowdown.“A global trade war is a lose-lose situation for everyone,” said Alain Bokobza, head of global asset allocation at Société Générale. “Some people will lose relatively more than others, but everyone will lose.”The US stock market has been hard hit in recent days, in contrast with the rally that followed Trump’s triumph at the polls, when investors bet that his promise to cut corporate taxes would boost profits. “This is what happens when a market that was priced for perfection sees what it least wanted to see: tariffs and slowing growth,” said Steven Grey, chief investment officer at Grey Value Management.The president’s tariffs against the US’s three largest trading partners have raised duties to some of the highest levels in decades, with the prospect of further increases as tensions rise still higher.Canadian Prime Minister Justin Trudeau said Trump’s stated reason for the tariffs — the cross-border trafficking of fentanyl — was “completely bogus” and suggested the US president really wanted to trigger “the total collapse of the Canadian economy because that will make it easier to annex us”.He added that Ottawa would retaliate with an immediate 25 per cent tariff on C$30bn (US$21bn) of US imports and tariffs on another C$125bn of US goods 21 days later.Ontario, Canada’s most populous province, said it would immediately rip up its contract with Starlink, the internet satellite provider founded by Elon Musk, and bar US companies from government tenders. It also announced it would no longer sell US-made alcoholic drinks. While Mexico will wait until Sunday to unveil countermeasures, China said it would levy a 10-15 per cent tariff on US agricultural goods, ranging from soyabeans and beef to corn and wheat, from March 10.Even before this week’s tariffs, some US economic indicators signalled possible problems ahead. A survey conducted by the American Association of Individual Investors showed investor confidence plunged close to an all-time low in late February, while the Federal Reserve Bank of Atlanta’s running estimate of US GDP growth, published on Monday, pointed to a 2.8 per cent contraction in the first quarter.Bank stocks — which are sensitive to economic jitters — suffered heavy declines on Tuesday, with the KBW Bank index down 3.6 per cent.Citigroup and Bank of America fell 6.3 per cent on Tuesday. Morgan Stanley lost 5.7 per cent and Goldman Sachs shed 4 per cent. More

Businesses have begun stockpiling materials, reviewing manufacturing footprints and preparing to raise prices as Donald Trump’s trade war has entered “uncharted territory” with sweeping tariffs on Canada, Mexico and China. Sectors including manufacturing, retail and food were among those to highlight shocks to their supply chains after the US president imposed 25 per cent duties on imports from its two North American neighbours and raised new tariffs on China to 20 per cent. Canada and China also quickly announced retaliatory measures that US groups warned could hurt sales and jobs. Carmakers, already struggling with stretched margins and heavy investments in electric vehicles, are expected to be hit hardest by the expanding trade war due to their complex international supply chains.German automotive supplier Continental said it would review its production capacity in Mexico and Canada as its shares slid 12 per cent in Frankfurt on Tuesday on concerns about the tariff impact. Continental employs more than 23,000 people in Mexico, an important production hub for car companies. It announced a $90mn investment to build its 22nd plant in the country just a year ago.French car parts supplier Forvia also warned of an “enormous” impact for the industry. The company has extensive manufacturing operations in Mexico. The group, with customers including Stellantis, Tesla and China’s BYD, has estimated the levies could raise annual costs by €200mn-€450mn. The figures come from details of internal discussions obtained by the Financial Times and confirmed by the company on Tuesday.“Putting 25 per cent on significant flows of purchases for the sum of the industry automatically has a very significant impact,” Olivier Durand, Forvia’s chief financial officer, said in an interview.Bernstein estimated an annual hit of up to $40bn on the American automotive sector if trade flows remain unchanged — which would translate to an average additional cost of $1,200 per US-made vehicle. More than $13bn in automotive cash flows would probably be wiped out for General Motors, Ford and Chrysler owner Stellantis in fiscal year 2026 if the tariffs remained in place, the firm said. Boeing’s shares fell 6.6 per cent on Tuesday. The plane maker’s plants are in the US, but its supply chain stretches throughout North America. Jefferies analyst Sheila Kahyaoglu estimated the company spent $1bn annually on its Mexico supply chain, and its Winnipeg, Canada, factory makes parts for the 787.US retailers also warned of looming higher prices for consumers. Big-box retail chain Target warned of profit pressures related in part to tariffs on Tuesday. Chief executive Brian Cornell acknowledged some items might become more expensive, with prices of fresh fruits and vegetables from Mexico poised to escalate quickly. Only about half of the company’s products are made in the US.  Rick Gomez, Target’s chief commercial officer, said its merchants would have to be careful about pricing rather than passing through higher costs. As an example, he said Target might freeze the price of Christmas ornaments at $3, “so maybe we’ll take pricing up a little bit on stockings to cover where we are in Christmas ornaments”. Corie Barry, chief executive of Best Buy, said on Tuesday that China and Mexico remained the biggest and second-biggest sources for the consumer electronics it sold. “We expect our vendors across our entire assortment will pass along some level of tariff costs to retailers, making price increases for American consumers highly likely,” Barry told analysts. Industry experts warn the biggest uncertainty is how long these measures will be in place, and if exemptions will be introduced to alleviate the impact of them. “This administration believes that tariffs are important in and of themselves,” said Tim Brightbill, partner at law firm Wiley Rein and an expert on international trade law. American stocks of platinum, a raw material in manufacturing products from cars to jewellery, have jumped to their highest level since 2021 as buyers amassed it ahead of the tariffs, growing fivefold since December. There was also a broad sell-off in mining stocks on Tuesday, with uranium companies — many of which extract the metal in Canada — down overnight. Uranium is a critical element in nuclear fuel development. US spirits trade groups said they were concerned Canadian shops would take American spirits off their shelves and estimated that the tariffs imposed on Mexico and Canada could lead to a loss of more than 31,000 jobs. Spirits are among the first category hit by the retaliatory tariffs announced by Canada on Tuesday, alongside consumer goods such as food, clothes and cosmetics, and electronics such as home appliances.Many of the retaliatory tariffs target American agricultural exports. China will impose a 15 per cent tariff on US chicken, wheat, corn and cotton, and 10 per cent on sorghum, soyabeans, pork and beef. Canada set levies on American imported grains, meat and dairy products. Reporting by Ian Johnston in Paris, Patricia Nilsson in Frankfurt, Kana Inagaki, Camilla Hodgson and Madeleine Speed in London, Gregory Meyer and Guy Chazan in New York and Claire Bushey in Chicago More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldOn March 3, Donald Trump made two highly significant decisions. One was to impose tariffs on Canada and Mexico at a rate of 25 per cent, as well as on Chinese imports at a rate of 10 per cent on top of the 10 per cent imposed last month. A 25 per cent tariff on imports from the EU is expected to follow. Together, these four economies produce 61 per cent of US imports of goods. The other and more significant decision was to suspend US military aid to Ukraine, giving the beleaguered country what appears to be a Hobson’s choice between surrender and defeat. Trump’s friend Vladimir Putin must be ecstatic: the US president is tearing the west apart before his happy eyes.These are merely two sets of decisions in the whirlwind that has accompanied the second Trump presidency. But for the outside world, they are of huge significance. They represent the end of liberal, predictable and rules-governed trading relationships with the world’s most powerful country and also the one that created the system itself. They also represent the abandonment by the US of core alliances and commitments in favour of a closer relationship with an erstwhile enemy. Trump clearly thinks Russia more important than Europe.In both cases, he is sorely mistaken. As Maurice Obstfeld, former chief economist of the IMF, has noted, the US’s trade deficits are not due to cheating by trading partners, but to the excess of its spending over income: the biggest determinant of America’s trade deficits is its huge federal fiscal deficit, currently at around 6 per cent of GDP. The Republican-controlled Senate’s plan to make Trump’s 2017 tax cuts permanent guarantees that this deficit will persist for at least as long as markets fund it. Given this, attempts to close trade deficits with tariffs are like trying to flatten a fully-filled balloon.Some content could not load. Check your internet connection or browser settings.To understand this would require some knowledge of macroeconomics, which Trump lacks altogether. But this is not his only folly. Trump also says: “Let’s be honest, the European Union was formed in order to screw the United States. That’s the purpose of it. And they’ve done a good job of it.” Moreover, he has said of Europe: “They don’t take our cars, they don’t take our farm products, they take almost nothing and we take everything from them.”Both complaints are silly. The EU was formed to bring prosperous economic relations and political co-operation to a continent devastated by two horrific wars. The US long understood and actively promoted this sensible response. But that was, alas, a very different US from today’s self-pitying blunderer.Moreover, as the Danish economist, Jesper Rangvid notes in his blog, Trump looks only at bilateral trade in goods, ignoring trade in services and earnings from capital and labour. It so happens that the income the US derives from its exports of services at least to the Eurozone and the returns on capital and the wages of labour it has exported there offset its bilateral deficits in goods. The overall Eurozone bilateral current account balance with the US is close to zero, not that even this matters. But bilateral balances in goods alone are less significant even than overall bilateral balances. Given how he earns his money, Trump has been running a big deficit in goods all his life. It hardly seems to have done him much harm. (See charts.)For Mexico and Canada, the economic costs of these tariffs will be high, since their exports of goods to the US were 27 per cent and 21 per cent of GDP respectively, in 2023. EU exports of goods to the US were only 2.9 per cent of its GDP in 2023. For it, therefore, the impact of the 25 per cent tariff would not be that great. Yet it would still be an act of unjustifiable, indeed economically illiterate, economic warfare. The EU would have to retaliate. Transatlantic relations would be permanently damaged.Some content could not load. Check your internet connection or browser settings.Even the trade war, outrageous though it is, pales by comparison with the ambush of Volodymyr Zelenskyy in the Oval Office by the US president and vice-president last Friday and the subsequent suspension of military aid to Ukraine. The aim may be to force Zelenskyy to sign the minerals deal. But the bigger problem is that Zelenskyy distrusts Putin, for good reason, and now has no grounds to trust Trump either. Also Trump may want a “peace deal”, but why would Putin agree to a genuine one if Ukraine is his for the taking?Both men are underestimating the will of Ukrainians to be a free people. But if that aim is to be achieved, Europe will have to take up the burden of both securing its own defence and underpinning that of Ukraine. Friedrich Merz, the next chancellor of Germany, was right when he said that his “absolute priority will be to strengthen Europe as quickly as possible so that, step by step, we can really achieve independence from the USA.” Those steps must also be taken quickly. One will be to accelerate the transfer of the more than €200bn in seized Russian reserves to Ukraine. Another will be a huge defence build-up now that the US commitment to Nato has collapsed.Some content could not load. Check your internet connection or browser settings.The EU plus UK has a combined population 3.6 times Russia’s and a GDP, at purchasing power, 4.7 times larger. The problem, then, is not a lack of human or economic resources: if (a big if) Europe could co-operate effectively it could balance Russia militarily in the long run. But the difficulty is in the medium run, since Europe is unable to make some crucial military equipment, on which it and Ukraine depend. Would the US refuse to supply such weapons if Europeans bought them? Such a refusal to supply would be a moment of truth.Trump is waging economic and political war on US allies and dependants. But the resulting collapse in trust of the countries that used to share its values will end up very costly for the US, too.martin.wolf@ft.comFollow Martin Wolf with myFT and on Twitter More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The UK economy will be dented by slowing global trade and higher costs as a result of rising tariffs even if it escapes being hit directly by new US levies, chancellor Rachel Reeves has said. “I don’t want to see tariffs increased,” Reeves said at an event hosted by Make UK, a lobby group. “Even if tariffs are not applied to the UK, we will be affected by slowing global trade, by a slower GDP growth and by higher inflation than would otherwise be the case.”The chancellor said she saw good reasons to be hopeful about the prospect of a trade deal between the UK and the US, even as she struck a downbeat note about the wider implications of Trump’s decisions to boost tariffs on Canada, Mexico and China. Show video infoHer concerns come as the trade war widened, with President Donald Trump ploughing ahead with higher tariffs on some of America’s biggest trade partners. Trump on Monday announced he would press ahead with tariffs of 25 per cent on all imports from Canada and Mexico. He also signed an executive order to raise the level of additional tariffs on Chinese imports from 10 per cent to 20 per cent.Reeves was speaking on the same day the Treasury was due to receive the latest round of forecasts from the Office for Budget Responsibility — the UK’s official fiscal forecaster — ahead of a Spring Statement later this month. Economists expect the outlook to show weaker growth and potentially higher inflation than in the October budget, endangering the chancellor’s margin of error against her key fiscal rules. The Treasury has been planning to cut public spending in a bid to restore the “headroom” against its self-imposed fiscal restraints. The Bank of England has already warned that the UK will not be immune from mounting trade hostilities. In its February economic outlook, the BoE said the impact on global growth was “likely to be negative” if Trump goes ahead with higher levies, while there remains “significant uncertainty” over the implications for inflation. Speaking on Tuesday, Reeves said she would continue to make a case for free and open trade, saying that higher tariffs do not serve anyone well. She spoke as the S&P 500 index gave up all its gains since Trump won a second term, as investors took fright at mounting risks to global growth. Trump said last week during a visit to Washington by Prime Minister Sir Keir Starmer that the two sides were in talks over a bilateral trade pact. Reeves said on Tuesday that she was not “naive” about the hurdles ahead. “This is not going to be an easy thing to secure for reasons that we all understand,” she said. “There will have to be give and take on both sides. We absolutely recognise that, but I do think there’s a big opportunity here.” Reeves reiterated the importance of the US-UK partnership in the wake of Trump’s decision to suspend military aid to Ukraine. The US and UK were “closely intertwined” when it came to security, she said. “They are our closest partners when it comes to defence and security and that will continue to be the case.”  More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldShow video infoDonald Trump has imposed a swath of tariffs on Canada, Mexico and China, sparking retaliation from Beijing and sending stock markets lower as fears mount over a trade war.In the most sweeping trade measures since returning to the White House in January, the US president hit imports from Canada and Mexico with a 25 per cent tariff that went into effect on Tuesday.The White House also imposed an additional 10 per cent tariff on Chinese imports on top of a 10 per cent levy imposed last month. Trump has accused the three countries of failing to clamp down on the trafficking of the deadly opioid fentanyl while also demanding that Mexico and Canada tighten their borders.The moves drew an immediate response from Beijing, which said it would levy a 10-15 per cent tariff on US agricultural goods, ranging from soyabeans and beef to corn and wheat, from March 10. Show video infoCanada also unveiled tariffs on $107bn of US imports, starting with $21bn of imports immediately. “Canada will not let this unjustified decision go unanswered,” Prime Minister Justin Trudeau said in a statement. Mexican President Claudia Sheinbaum said on Tuesday that the government would wait until Sunday to unveil countermeasures, which would include tariffs and other actions. The tariffs against the US’s three largest trading partners raised duties to some of the highest levels in decades, and come after Trump last month gave Canada and Mexico a 30-day reprieve from the measures.“Investors have started to really fear Trump’s policies,” said Emmanuel Cau, an analyst at Barclays. “If there is a growth problem in the US, that will be hard to ignore . . . People are nervous, with some even starting to fear a recession [in the US].” US stocks fell on Tuesday, extending the previous day’s heavy declines and wiping out all the gains made since Trump’s election victory in November. The S&P 500 dropped 1.6 per cent, while the Nasdaq Composite lost 1.4 per cent.In Europe, the benchmark Stoxx Europe 600 dropped 2 per cent. Germany’s exporter-heavy Dax, which on Monday posted its best performance in more than two years, tumbled 3.3 per cent. Carmakers, which are among the most exposed given several of them export vehicles from Canada and Mexico for sale in the US, were hit, with Volkswagen falling 4.3 per cent and Stellantis dropping 10.6 per cent.Japan’s exporter-heavy Nikkei 225 slid 1.2 per cent, while Australia’s S&P/ASX 200 retreated 0.6 per cent. Hong Kong’s Hang Seng index, which fell nearly 2 per cent during the session, closed down 0.3 per cent, while mainland China’s CSI 300 benchmark dropped 0.1 per cent. In foreign exchange markets, the dollar fell 0.5 per cent against a basket of currencies, including the euro, yen and pound, following a 0.8 per cent drop on Monday.Mexico’s peso weakened 0.7 per cent against the US dollar to 20.85, while the Canadian dollar fell 0.2 per cent to C$1.451 versus the US currency.The European Commission warned of far-reaching repercussions. “These tariffs threaten deeply integrated supply chains, investment flows, and economic stability across the Atlantic,” it said. The levies against Ottawa are set at 25 per cent except for Canadian oil and energy products, which face a 10 per cent tariff. Canada accounts for about 60 per cent of US crude imports.In its response, China also targeted US companies, placing 10 companies on a national security blacklist and slapping export controls on 15 others. It also banned US biotech company Illumina from exporting its gene-sequencing equipment to China. Beijing had added Illumina to its “unreliable entities” list last month in response to Trump’s initial barrage of tariffs. China’s commerce ministry earlier hit back at the US justification of the tariffs over fentanyl flows, saying the claim “disregards facts, international trade rules and the voices of all parties, and is a typical act of unilateralism and bullying”.Lynn Song, greater China economist at ING, said Beijing’s action — together with countermeasures last month — targeted a total of about 25 per cent of US exports to China, amounting to “a relatively muted response compared to the 10 per cent broad-based tariffs implemented by the US”. Additional reporting by Andy Bounds in Brussels More