The FTSE 100 has suffered its worst day in more than five years as Donald Trump’s trade war sparked a global meltdown on markets.

The UK’s blue chip index was down 4.86 per cent at the close after an extraordinary international bloodbath – with fears of a surge in inflation and worldwide recession. That was the biggest drop since March 27, 2020. 

The selloff deepened after China hit back by mirroring the US president’s 34 per cent tariffs on its exports, in a grim sign of escalation.

But Mr Trump swiped at ‘panicking’ Beijing, writing on his Truth Social site: ‘CHINA PLAYED IT WRONG, THEY PANICKED – THE ONE THING THEY CANNOT AFFORD TO DO!’

He also posted a video suggesting that he was ‘purposely crashing the markets’ and was playing ‘chess while everyone else is playing checkers’. 

The US President had earlier bizarrely claimed that Keir Starmer was ‘very happy’ with the brutal tariffs he had imposed on Britain.

Investment bank JP Morgan has warned ‘there will be blood’, saying the chances of a contraction in the world economy have spiked from 40 per cent to 60 per cent. 

The Prime Minister has pledged a ‘calm’ response, saying the UK has made ‘big progress’ towards a wider deal with the US that can do away with the brutal levies altogether.

However, American officials have been playing down the prospect of an agreement, suggesting that 10 per cent is the lowest level available. Some believe removing tariffs altogether would open the door to ‘abuse’, according to Bloomberg. 

Mr Trump himself bizarrely claimed that Sir Keir was pleased with the situation, as he abandoned the chaos of Washington to head to Florida – where he is due to watch golf at one of his courses. 

He also claimed the stock market will ‘boom’, despite some of his billionaire allies – such as Elon Musk – seeing their personal wealth hammered.

Sir Keir took the first step towards retaliating yesterday as he warned there would ‘clearly be an economic impact from the decisions the US has taken both here and globally’. A list of potential targets include jeans, whiskey and chicken wings.

Industries have been appealing for bailouts, with the ‘reciprocal’ levies due to take effect at 5am tomorrow.  

However, some business leaders have been urging Sir Keir not to hit back. 

In other twists and turns today:

• Federal Reserve chief Jerome Powell has warned that ‘larger than expected’  tariffs will reduce growth and fuel inflation, as Mr Trump demanded he cuts interest rates;
• Foreign Secretary David Lammy has said he regrets America’s ‘return to protectionism’; 
• Tony Blair has urged Sir Keir not to hit back at the UK, telling students at King’s College London: ‘I don’t think it is in the UK’s best interest to retaliate.’ 
• Jeremy Hunt has insisted the UK should cut tariffs and turn itself into ‘Singapore-on-Sea’ to prosper in the new world order;
• The FTSE 100 slid towards 8,400 in early trading, down another 0.8 per cent, although it has not been as badly hit as other indexes;
• Asian shares continued to fall overnight after Wall Street suffered its worst day since the height of Covid; 
• Mr Trump has waded into French politics by condemning hard-right National Rally leader Marine Le Pen’s conviction for faking expenses, demanding she is allowed to run for president;  

Speaking outside Air Force One overnight before flying to Florida, Mr Trump said Sir Keir had taken the tariffs ‘really well’. 

He said, when initially asked if he had given his approval to Starmer’s Chagos Islands deal: ‘We are talking to the Prime Minister about it [chagos deal] and we will see how that turns out.  

‘We have a very good dialogue and I think he was very happy about how we treated them on tariffs.’ 

He shrugged off the meltdown on financial markets, telling reporters: ‘The markets are going to boom, the stock is going to boom, the country’s going to boom and the rest of the world wants to see is there any way we can make a deal.

‘They’ve taken advantage of us for many, many years. Many years we’ve been on the wrong side of the ball and I tell you what, I think it’s going to be unbelievable.’

Asked today whether that characterisation was accurate, a Downing Street spokesman said: ‘We’re disappointed by the tariffs that have been brought in.

‘Clearly, there will be an economic impact from the decisions the US has taken, both here and globally, but both the Prime Minister and the Business Secretary have been very clear over the last 24 hours that we will continue to act in the best interests of the UK, and we’re prepared to do so.’

Sir Keir is expected to urge other members of the G7 to cut tariffs between themselves, rather than retaliating against the US.  

The spokesman said: ‘We’ll be engaging with international leaders over the weekend… The need for engagement with international leaders is clear. It is a changing, shifting global economic landscape.’

It is unclear which countries will be included in the calls.

Traders watched the unfolding ‘nightmare on Wall Street’ in horror yesterday after analysts said Mr Trump had ‘detonated the most aggressive trade shock the market has seen in decades’, unveiling tariffs that went further than experts had feared. 

In a note to investors headlined ‘there will be blood’, JP Morgan strategists, led by Bruce Kasman, pointed to a global recession now being more likely than not.

‘Disruptive US policies has been recognized as the biggest risk to the global outlook all year,’ they wrote.

‘The effect of this tax hike is likely to be magnified through retaliation, a slide in US business sentiment, and supply chain disruptions.’ 

In a hardening of the UK’s position, Sir Keir set a May 1 deadline for a consultation on imposing tit-for-tat tariffs and published a 417-page dossier of US goods that could be hit, which included everything from golf clubs to dolls.

Sir Keir warned there was unlikely to be a full return to trading patterns of the past, saying that Mr Trump’s approach was ‘not just a short-term tactical exercise, it is the beginning of a new era’.

Asked whether it was time for the UK to stand up to Mr Trump, Mr Lammy told reporters following a meeting with Nato counterparts in Brussels: ‘The United Kingdom, like France, is a great maritime nation.

‘We are a nation that believes in open trade, and I regret the return to protectionism in the United States, something that we’ve not seen for nearly a century.

‘As you know, we are consulting with business and industry. At this time, we are engaged in discussions with the United States to strike an economic agreement and an economic deal.

‘And of course, we have been absolutely clear that all options are on the table as we ensure the national interests of the British people, who will be very concerned at this time about how this affects the bottom line for them and their economic welfare.

‘We will put their national interest first, and it’s in their national interests to be negotiating with the United States an economic agreement at this time, but keeping all options on the table.’

The chief executive of JCB, Graeme MacDonald, told BBC Radio 4’s Today programme that the UK cannot win a trade war with the US. 

Speaking after the company announced it was expanding a factory in America, Mr MacDonald said: ‘Entering into a trade war with an economy the size of the US – the US is bigger than India, Germany, UK, Brazil put together by significant margin – it’s a trade war we can only lose.

‘My advice… do not retaliate, negotiate. Because that’s in the nature of this administration, they will negotiate a deal.’ 

Targeted countries could retaliate with tit-for tat tariffs that experts warned would unleash a ‘spiral of doom’ and drag Britain, and the world, into a recession.

Household names suffered huge drops, with Apple boss Tim Cook, who attended Mr Trump’s inauguration, seeing more than £200billion wiped off the value of his company due to its reliance on Chinese production.

UK officials have drawn up a mammoth 417-page list of US imports that could be hit with tariffs in revenge for Trump’s attack.

Consumer favourites like Levi’s jeans, Jack Daniel’s whiskey and Harley Davidson motorcycles are all in the astonishingly lengthy document.

They were subject to tariffs during the trade wars in Mr Trump’s first term in the White House.

But the comprehensive list also covers items from livestock and raw meat like chicken wings to rollercoasters, cricket balls, live bees and tailors’ dummies.

In a move that may horrify the golf-loving president, the list includes club and ball brands made in the USA.

The list was released as part of the government’s four-week consultation on how to respond to Trump’s tariff tirade. Ministers have set a deadline of May 1, after which the UK could act.