Why Global Stocks Are Reacting Negatively to Trump Tariffs

How did global stock markets react?

Global stock markets plummeted throughout Monday (7/4/2025). Conglomerates stated that the world is threatened by a "nuclear winter" due to the economic war waged by United States President Donald Trump.

The Nikkei-225 Index on the Tokyo Stock Exchange, Japan, closed down by 7.83 percent. The early-week decline is reminiscent of the severe correction during trading on Tuesday, October 20, 1987.

At that time, the Tokyo stock exchange was affected by a global phenomenon known as "Black Monday." The term refers to the collapse of global markets at the beginning of the week. Now, global markets are also experiencing a downturn at the start of the week.

"Stock prices plummeted due to the unreasonable tariff policies of the U.S. administration under Donald Trump. The turmoil in the market will not subside until the policies are revised," said the chief economist at Sony Financial Group, Hiroshi Watanabe, as quoted by Kyodonews.

Nomura Securities analyst, Maki Sawada, stated that the worst is yet to come. "There has been no response to the risks of a worsening global economy and corporate earnings," she said.

What is the condition of the US stock market?

The United States stock market has lost valuation equivalent to Indonesia's gross domestic product over the span of two years. This loss reflects market anxiety over Donald Trump's decision regarding import tariffs for all trading partners of the United States.

At the close of trading on Thursday evening (3/4/2025) New York time or Friday morning Western Indonesian Time, all major U.S. stock market indices turned red. The S&P 500, Dow 30, and Nasdaq dropped by 4.84 percent, 3.98 percent, and 5.97 percent, respectively.

The Bloomberg Billionaires Index reported that the world's 500 richest individuals lost assets amounting to 208 billion US dollars due to a stock market decline. Elon Musk, the world's richest person and a key supporter of Trump, lost 11 billion US dollars as the shares of his companies plummeted following Trump's decision.

What about the Indonesian stock exchange?

The Indonesia Stock Exchange responded to the emergency conditions in the global stock market in recent weeks. Facing the reopening of the stock market after a long holiday, Tuesday (8/4/2025), the stock exchange authorities also changed the provisions for implementing a temporary suspension of securities trading or trading halt on the exchange and reduced the percentage of the minimum limit for stock price declines or lower auto rejection or ARB.

President Director of the Indonesia Stock Exchange (IDX) Iman Rachman in a press conference at the IDX Main Hall in Jakarta, Tuesday, said that since March 27, the global stock price index has experienced a decline and price fluctuations of between 5-11 percent.

This condition has become more significant since the President of the United States (US) Donald Trump announced an increase in import tariffs to the US for many countries, including Indonesia. This condition, said Iman, was not experienced by the domestic stock exchange because trading was closed along with the joint leave of Eid al-Fitr. However, the IDX anticipates

Efforts by authorities in Indonesia

Bank Indonesia promises aggressive market intervention to stabilize the rupiah. The move comes amid pressure on the rupiah as the stock market continues to fall and global foreign exchange markets have been under pressure in recent days.

"Pressure on the rupiah exchange rate has occurred in the off-shore market (NDF) amidst the long domestic market holiday for Eid al-Fitr 1446 H," said Head of the BI Communication Department, Ramdan Denny Prakoso.

BI will intervene in offshore markets continuously in Asia, Europe, and New York. BI will also intervene aggressively in the domestic market since the opening of the market on April 8, 2025 in the foreign exchange market, both spot and domestic NDF, as well as purchasing Government Securities in the secondary market.

"In addition, BI will also optimize rupiah liquidity instruments to ensure sufficient liquidity in the money market and domestic banking sector. This series of measures by BI is aimed at stabilizing the rupiah exchange rate and maintaining market participants' and investors' confidence in Indonesia," said Denny.

What impact will Trump's tariffs have on global trade?

The World Trade Organization (WTO) views the US tariff policy as having significant implications for global trade and global economic growth prospects. The situation has been developing rapidly since the US announced its reciprocal tariff policy.

"We show that the tariff policy plus the measures introduced since the beginning of this year could cause trade volumes to contract by around 1 percent from previous projections," said WTO Director-General Ngozi Okonjo-Iweala.

Okonjo-Iweala is concerned about the decline in global trade and the potential for escalation of tariff wars. Because the high tariffs will cause world trade to decline even more sharply.

He also mentioned that there are still many countries that comply with the provisions of fairness and fairness of WTO tariffs, namely the most favored nation (MSN). However, due to US tariff policies and tariff retaliation from other countries, the implementation of MSN tariffs is expected to erode from 80 percent to 74 percent.

"I am also concerned that there will be significant trade diversion. WTO members must unite to maintain the implementation of MSN tariffs and prevent trade tensions from escalating," he said.

How are countries reacting to Trump's tariffs?

U.S. Treasury Secretary Scott Bessent said more than 50 countries have begun negotiations with the U.S. since the April 2, 2025, announcement of new tariffs and duties. Bessent and other officials did not name the countries or provide details of the talks.

“Unfair trade practices are not something that can be negotiated in a matter of days or weeks. The United States needs to see what these countries are offering and whether it is credible,” Bessent said.

The US universal tariff of 10 percent will go into effect worldwide on April 5, 2025. The “reciprocal” tariffs of 11-50 percent to a number of countries will start on April 9, 2025.

Bessent remains optimistic about Trump's decision because U.S. job growth has been stronger than expected. He's also fine with the stock market slump.