US stocks slid on Tuesday after an early-morning rally as President Donald Trump's administration indicated it will enact tariffs totalling 104 per cent on China on Wednesday.
Mr Trump earlier threatened to impose a 50 per cent duty on China if it did not drop its 34 per cent tariff, which matched the duty Mr Trump imposed on Beijing last week. That would come on top of a 20 per cent tariff on China related to alleged fentanyl trafficking.
"The President, when America is punched, he punches back harder. That's why there will be 104 per cent tariffs going into effect on China tonight at midnight," White House press secretary Karoline Leavitt said.
But Ms Leavitt suggested Mr Trump believes Beijing wants to negotiate on the tariffs.
The Dow Jones Industrial Average dropped 389 points – or 1.1 per cent – after being up more than 1,100 points earlier in the day. The S&P 500 and Nasdaq Composite also built on losses, falling 1.57 and 2.15 per cent, respectively.
In a social media post earlier on Tuesday, Mr Trump said he had a “great call” with South Korea's acting president Han Duck-soo about the country's trade surplus, tariffs and shipbuilding, among other topics. He added that the administration is also dealing "with many other countries".
Other so-called reciprocal tariffs were set to go into effect on Wednesday including 20 per cent on goods from the EU, 26 per cent on India, 25 per cent on South Korea, 24 per cent on Japan and 10 per cent on the UK.
Markets in Europe staged a modest rebound, halting dramatic losses after the US tariffs sparked their worst four-day drop since the pandemic.
The Stoxx Europe 600 index was up by 2.72 per cent on Tuesday as defence, travel and industrial shares improved. The tariffs had wiped about $1.7 trillion off the benchmark European index.
Germany's Dax, Britain's FTSE 100 and France's Cac 40 were also up by more than two per cent as markets calmed, having dropped several points on Monday. European leaders have sought to cool trade tensions after Mr Trump imposed tariffs on friend and foe alike.
European Commission President Ursula von der Leyen spoke to Chinese Premier Li Qiang on Tuesday to warn against escalating a trade war. Ms von der Leyen “called for a negotiated resolution to the current situation, emphasising the need to avoid further escalation”, her office said.
EU trade ministers indicated readiness to introduce counter-measures such as taxes on US digital giants. Britain has drawn up a 417-page list of possible products that could face tariffs if Prime Minister Keir Starmer decides to hit back at US goods.
The rebound in Europe followed more positive trading sessions in Asia. Investors were trying to gauge whether the market has reached a trough, or if they should brace for further pain.
Tokyo markets were up more than six per cent after Japanese Prime Minister Shigeru Ishiba held talks with Mr Trump. Hong Kong gained more than one per cent but was well short of recouping Monday's losses, its worst since 1997.
