The chances of a rate cut at the Bank of England Monetary Policy Committee’s next meeting on 8 May, lifted to 86% this morning up from 77% yesterday and around 50% last week. 

Traders are also factoring in that policymakers will be forced to make two further base rate cuts, by August and then by December. 

The committee has made three quarter-point cuts since August, as it bids to bolster the UK’s fragile economy.

JP Morgan raised the odds of a global recession this year to 60% from 40%. 

The US bank’s chief economist Bruce Kasman says in a note to clients: “The effect of this tax hike is likely to be magnified — through retaliation, a slide in US business sentiment, and supply chain disruptions.”  

He adds: “There will be blood.” 

The FTSE 100 index is down around 3.7% at 8155.3 points in mid-morning trading, after falling 1.6% yesterday, while major banks such as Natwest, Barclays, HSBC and Lloyds Banking Group are all down over 5% this morning. 

AJ Bell investment director Russ Mould says: “Unfortunately, the relentless selling continued, with markets falling across Asia and Europe and futures prices implying the US will do the same when trading begins later on. 

“There are so many moving parts that getting your head around the situation isn’t easy. With countless sectors set to be hit by tariffs, it’s difficult to know where to begin to comprehend the situation.” 

The moves come after Trump hit countries across the world with tariffs in reaction to what he sees as imbalances in global trade on Wednesday evening, after US markets had closed. 

They range from 53% on China, 20% on the European Union and South Korea, and a 10% baseline on all nations, which could wipe billions off economic growth. America has imposed a 10% baseline tariff on the UK. 

Baseline tariffs are set to go into effect on 5 April, with higher levies kicking in on 9 April. 

Trump told reporters overnight that he has spoken to Prime Minister Keir Starmer and that the UK leader is “very happy” with the treatment given to Britain. 

However, Exchequer secretary to the Treasury James Murray says this morning: “We’re disappointed at tariffs being imposed globally.” 

The UK has also sent a 417-page “indicative” list to British firms of products the government is considering imposing extra taxes on as imports from the US, “should the UK choose to respond with tariffs”.  

The sprawling list includes pure-bred breeding horses, potatoes, petroleum, woven fabrics and cars. 

However, Orton Financial head of mortgages Luther Yeates argues the market turmoil presents an “unexpected silver lining” for residential property investors. 

Yeates says: “If the pandemic taught us anything, it is that property remains a resilient asset class during periods of uncertainty.  

“Despite predictions, UK property prices surged to record highs after an initial period of stagnation. What’s more, house prices continued to soar into 2023, outpacing growth in previous years. If inflation remains elevated due to tariffs, we could witness something similar in the coming months. 

He adds: “Of course, higher mortgage rates present challenges for many people. But for investors, they present a significant opportunity.  

“Rising mortgage costs are pushing more potential buyers toward renting. With more would-be buyers staying in the rental market, demand for rental properties will likely climb even further.”