The economic landscape shifted dramatically at 22:30 Spanish time on Wednesday, marked by a controversial announcement from the Trump administration regarding new tariffs on global imports.

During a 30-minute speech outside the White House, the President presented a visual aid showcasing tariffs that would be significantly higher than previously anticipated by economists and investors.

This move represents what analysts consider the most substantial shift in trade policy since World War II, necessitating a recalibration of global economic parameters.

Following the announcement, US financial markets experienced immediate and severe declines, despite Wall Street having closed just prior.

Over the subsequent two days, the S&P 500 index fell by 10.5%, equating to a loss of more than $5 trillion (approximately €4.5 trillion), surpassing the combined annual GDP of Spain and France.

These declines mark some of the most challenging trading days for US markets since the onset of the COVID-19 pandemic and rank among the worst of the 21st century.

A trade war, defined as a situation where countries impose tariffs on each other, usually lacks winners, according to economists.

In today’s globalized economy, such tariffs disrupt operations for businesses of all sizes.

Consequently, import taxes lead to increased costs for consumers on goods that are either partially or wholly manufactured abroad.

As European leaders and China prepare potential retaliatory measures, the economic repercussions appear to be universally negative.

For instance, increased tariffs are likely to drive inflation as a large portion of consumer goods contain imported components.

Experts predict that the new tariffs will negatively impact economic growth, leading households to curtail spending due to rising prices.

Similarly, companies facing margin pressures from decreased demand may reduce investments and hiring.

Financial markets respond to the immediate implications for affected companies as well as to broader prospects of decreased economic growth coupled with rising inflation.

Tariff policies have been a source of concern for US markets in recent weeks.

Previous measures imposed by the Trump administration on imports from Mexico and Canada, as well as specific sectors like automobiles, steel, and aluminum, had already set a precedent.

As investors had anticipated additional tariffs, the actual announcement proved more severe than expected, encompassing all imports with elevated rates—20% for the European Union and 34% for China.

Post-announcement, the average tariff rate in the US surged from approximately 15% to near 25%, marking the largest tariff spike since the Great Depression.

Analysts have made preliminary calculations regarding the impact of these tariffs, which remain contingent on various factors, including the full implementation of the tariffs, potential retaliation from trade partners, fluctuations in exchange rates, and adjustments in consumer and corporate budgets.

Predictions suggest that US GDP could decrease by between one and 1.5 percentage points, which could expose the country to a recession by year’s end.

This scenario leads to high inflation projections, with estimates suggesting prices may accelerate by 4% to 5% annually, complicating the Federal Reserve's ability to lower interest rates.

For Europe, absent retaliatory actions, the primary concern lies in diminished economic growth, as lowered exports to the US are anticipated.

Analysts project a negative impact on Europe's GDP growth, with estimations suggesting a reduction by as much as 1%.

The economic environment reflects a possible stagflation scenario for the US yet poses a deflationary shock for the rest of the world, potentially prompting more rapid interest rate cuts by other central banks.

The immediate reaction among stock markets highlights that the tariff policy has inflicted greater damage on US markets than on those abroad.

The year-to-date decline in the S&P 500 stands at 13%, while the Nikkei has fallen by 15% and the Nasdaq by 19%.

In contrast, the Euro Stoxx 50 has shown minimal decline, and indices such as Germany's DAX and Spain's IBEX have increased.

Factors influencing these trends include The Trump policy and broader overvaluation of US markets, particularly technology stocks, prior to the announcement—while Germany’s spending plan has bolstered economic outlook in Europe.

Spain's stock market, despite being among the best performers in Europe this year, has not escaped the negative fallout.

The impact of tariffs, which are likely to hinder exports to the US, particularly affects sectors like agriculture and textiles.

While Spain is relatively insulated from direct exposure, the repercussions of lower growth in Europe will have downstream effects.

Additionally, as panic spreads across markets, automatic selling by investors contributes to the downward momentum in equity prices.

The sectors most significantly impacted by these market shifts initially include those with highly globalized supply chains, such as companies in the sporting goods sector like Nike, which manufacture overseas.

Apple, also facing heavy losses, sources components from Asia despite design centralization in California.

The automotive sector, including major players like BMW and Stellantis, has experienced declines as well, while the banking sector has been adversely affected by the expectations of a cooling global economy.

Internationally, the gloomy economic prospects are reflected across various asset classes.

Public debt has seen rapidly declining interest rates as investors gravitate towards safer havens like Treasury bonds.

Prices for oil and commodities have plunged—Brent crude fell by approximately 6.5%—on expectations of reduced global growth.

Conversely, demand for gold has risen as investors seek refuge amidst market turbulence.

The euro strengthened against the dollar, reaching its highest levels in a decade, trading at approximately 1.10 euros per dollar due to anticipated economic slowdowns in the US.

The motivations behind the administration's insistence on stringent tariffs stem from long-standing critiques of imports and globalization since the 1980s, driving support for Trump's political movement.

Theoretical underpinnings suggest a desire to reindustrialize the US economy, focusing on increasing domestic production.

However, the resulting financial impacts are leading to layoffs in several key industries, highlighting the conflict between economic strategy and its real-world ramifications.

The duration of market declines remains uncertain, heavily reliant on the implementation of the announced tariffs, potential retaliatory actions from trade partners, and the prospect of negotiations resulting from ongoing tensions.

Market participants are currently navigating the complexities of whether the tariffs represent a negotiating stance or a definitive policy direction.

The President appears willing to tolerate market declines, projecting an extended period of transition requiring close observation.

Investment firms recognize the potential for significant economic implications resulting from these policy announcements, indicating a cautious outlook as markets brace for continued volatility.