FTSE 100 hits one-year low as market fears deepen after Trump stands by tariffs

The UK’s FTSE 100 has plunged to a one-year low as fears deepen over the global impact of Donald Trump’s tariffs, despite Sir Keir Starmer promising new measures to support under-pressure manufacturers.

Analysts have warned that the scale of disruption in global financial markets is one of the worst to be felt in decades.

The index, which tracks the country’s top 100 listed firms, dropped by about 5% in early trading on Monday as a sharp sell-off kicked in shortly after markets opened.

The panicked mood was felt across Europe, with Germany’s Dax index recording a drop of about 6.5%, and France’s Cac 40 down around 5.3% in the morning.

Overnight, Asian stocks across the board were sinking to new lows after Mr Trump said he will not back down on his sweeping import taxes unless countries even out their trade with the US.

The US president said overnight on Monday that he did not want global markets to fall, but also that he was not concerned about the major sell-off, adding: “Sometimes you have to take medicine to fix something.”

He also said he had spoken to leaders from around the world, adding that they were “dying to make a deal” with the US.

Mr Trump, who spent the weekend in Florida playing golf, unveiled a range of tariffs last week, including a 10% “baseline” rate on all the US’s trading partners which came into effect on Saturday.

In a new research note, a group of analysts for Deutsche Bank said investors were pricing in a “growing probability of a US recession”.

America’s S&P 500 index suffered one of the worst two-day drops, over Thursday and Friday, since the Second World War – with the scale of the shock similar to during Covid-19, the global financial crisis, and Black Monday in 1987, according to the analysts.

Over the coming days, traders will be watching closely what the US administration’s next move is – whether it be “moving to negotiations, or whether they double down” on tariffs.

The Prime Minister has promised to make a raft of reforms designed to provide “certainty” and “support for industry” as firms grapple with the impact of new rules from the White House.

Under new measures to be announced on Monday, rules around fines for manufacturers who do not sell enough electric cars will be relaxed, and supercar firms will be exempt.

While Sir Keir will reinstate the 2030 ban on the sale of new petrol and diesel cars, luxury car-makers like Aston Martin and McLaren will still be allowed to keep producing petrol cars beyond that deadline.

Since Mr Trump announced his financial plans on Wednesday, a 25% tariff is now applied to foreign cars imported into the US, while other products face a 10% levy.

Transport Secretary Heidi Alexander said the UK Government has had to look at its electric vehicle plans with “renewed urgency” because of the challenges facing manufacturers.

Jaguar Land Rover, one of the UK’s biggest car-makers, announced over the weekend that it will “pause” shipments to the US as it addresses the new trading rules.

Ms Alexander said the Government is not pretending its reforms to electric vehicle rules are a “silver bullet”, but that it is “part of a puzzle that we need to get right over the coming years”.