New York: Financial markets around the world are reeling following President Donald Trump’s latest and most severe set of tariffs, and the US stock market is taking the worst of it so far.

The S&P 500 was down 4 per cent in midday trading, more than other major stock markets, and at its bottom in the morning was on track for its worst day since COVID struck in 2020. The Dow Jones Industrial Average was down 1412 points, or 3.3 per cent, as of 11.50am Eastern time, and the Nasdaq composite was 5.1 per cent lower.

The Australian sharemarket is set to fall at the open, adding to heavy losses on Thursday. Futures at 4.00am AEDT are pointing to a fall of 48 points, or 0.61 per cent, at the open.

Little was spared as fear flared globally about the potentially toxic mix of higher inflation and weakening economic growth that tariffs can create.

Everything from crude oil to Big Tech stocks to the value of the US dollar against other currencies fell. Even gold, which has hit records recently as investors sought something safer to own, pulled lower. Some of the worst hits walloped smaller US companies, and the Russell 2000 index of smaller stocks dropped more than 5 per cent into what’s called a “bear market” after losing more than 20 per cent from its record.

Investors worldwide knew Trump was going to announce a sweeping set of tariffs late Wednesday (Thursday AEDT), and fears surrounding it had already pulled the S&P 500 10 per cent below its all-time high last month. But Trump still managed to surprise them with “the worst case scenario for tariffs,” according to Mary Ann Bartels, chief investment officer at Sanctuary Wealth.

Trump announced a minimum tariff of 10 per cent on imports, with the tax rate running much higher on products from certain countries like China and those from the European Union. It’s “plausible” the tariffs altogether, which would rival levels unseen in roughly a century, could knock down US economic growth by 2 percentage points this year and raise inflation close to 5 per cent, according to UBS.

Such a hit would be so frightening that it “makes one’s rational mind regard the possibility of them sticking as low,” according to Bhanu Baweja and other strategists at UBS.