Wall Street slumps on US, China economic fears; Nasdaq slips 2%

Trump's on-again, off-again tariff threats against Canada, Mexico, China and others have left the US financial markets in turmoil and consumers unsure what the year might bring.

Stock markets slipped on Monday as investors fretted over the impact of President Donald Trump's trade policy on the economic growth of the United States and China, the world's biggest economies.

Wall Street's three main indexes opened in the red, with the tech-heavy Nasdaq falling two percent, after Trump himself declined to rule out the risk of a US recession.

"I hate to predict things like that," he told a Fox News interviewer on Sunday when asked directly about a possible recession in 2025.

"There is a period of transition because what we're doing is very big -- we're bringing wealth back to America," he said, adding: "It takes a little time."

Trump's on-again, off-again tariff threats against Canada, Mexico, China and others have left the US financial markets in turmoil and consumers unsure what the year might bring.

"Unease about the effect of Trump's tariffs hangs over financial markets at the start of the week," said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

"The prospect of a recession in the US is lurking, with consumer confidence falling, companies facing increasing trade complexity and investors turning more nervous," she added.

The London, Paris and Frankfurt stock markets were all lower in afternoon deals, with German shares also hit by concerns that the country's next chancellor may struggle to push through a massive spending plan.

"Risk sentiment has soured as investors react to President Trump's various tariff announcements and as the US economic outlook begins to cloud over," said David Morrison, senior market analyst at financial services firm Trade Nation.

"The president appears to be taking a scatter-gun approach in terms of targets, while teasing the markets with last minute reprieves, delays or softening in scope. All in all, it's proving difficult to price all this in," Morrison said.

- German spending plan -

The European Union said on Monday the Trump administration did not appear to want to make a deal that could avoid tariffs against the 27-nation bloc.

Beijing's retaliatory duties on certain US agricultural goods came into force on Monday after Chinese products were hit with 20-percent US tariffs.

Kathleen Brooks, research director at XTB trading platform, said investors were also reacting to news that Germany's chancellor-in-waiting, Friedrich Merz, could face opposition to a massive spending plan that boosted markets last week.

Germany's Green party said on Monday it would not give the votes necessary for the constitutional changes proposed by Merz.

These partially lift spending limits in defence and establish a 500-billion-euro ($540-billion) infrastructure fund.

"The news that Germany's soon-to-be chancellor might not have free reign over Berlin's purse strings has limited euro upside for now," Brooks said.

Traders also reacted to weekend data from China showing that consumer prices fell 0.7 percent in February, the first drop in 13 months.

"The data only reinforces what's been clear for months -- deflationary pressures remain firmly entrenched in the world's second-largest economy," said Stephen Innes at SPI Asset Management.

Hong Kong and Shanghai stock markets fell, while Tokyo finished higher.