On Monday morning traders woke up to signals of carnage across their screens. Hong Kong’s Hang Seng index closed down over 13 per cent, marking its worst single-day fall since 1997. In Europe, the UK’s FTSE fell to a one-year low and at one point Germany’s Dax was down 10 per cent. Then, as US markets opened, the S&P 500 plunged 4 per cent, having already shed $5.4tn in market value since US President Donald Trump unveiled what he called his “liberation day” package of tariffs to the world on April 2.

Before last week, investors had been rebalancing their portfolios away from the US. Europe was buoyed by plans for higher defence spending, while tech optimism boosted stocks in China. But Trump’s worse than expected plan to push US effective tariff rates to their highest in over a century spares no one. Is he really serious? And if so, how do you put a price on the world’s largest economy withdrawing from the global trading system? That is what investors are now trying to answer.

The unequivocal conclusion is that Trump’s tariffs have raised the chance of a US and global recession. The sell-off now risks metastasising. In America, junk bond spreads have jumped, hedge funds have been hit with hefty margin calls and as the Financial Times has reported, large institutional investors may be on the cusp of selling stakes in illiquid private equity funds. Jolts in US markets will spread far and wide. The pain will not be limited to the wealthy. Pension savings and retail investors’ post-pandemic spoils are eroding. Slumping company valuations will have knock-on implications for jobs.