As of 04:00 European time, in the early hours of Monday, we are witnessing the very real and devastating financial consequences of what can only be described as an American collective brain haemorrhage.

Let’s be clear: this is not a crisis caused by macroeconomic fundamentals or an external shock. This is man-made. And the man in question is Donald J. Trump.

On Sunday evening U.S. time, President Trump poured petrol on an already burning fire by declaring, “I don’t want stocks to go down, but sometimes you have to take medicine.” In other words – the president is clinging stubbornly to his economically destructive trade war policies.

The reaction has been immediate and brutal.

Asian equity markets are in full-blown meltdown mode, with Japan’s stock market plunging 8% overnight and stocks in Hong Kong are down 10%. We are now staring down the barrel of a massive global sell-off when markets open in Europe and the United States later today.

But this is no longer just about equities. The contagion is spreading.

Credit markets are showing signs of strain, and the risk of a liquidity crunch is rising sharply. The entire global financial system is under threat – and we are only at the beginning of this phase of the crisis.

Oil prices have taken yet another hit, falling below $60 a barrel – down an additional 3%. This reflects not just uncertainty, but genuine fears of a steep drop in global demand.

Recession, inflation, and confusion

At this point, a U.S. recession appears almost inevitable. We should expect a marked increase in American unemployment in the coming months.

Previously, I argued that Trump’s tariff policies would drive U.S. inflation above 5% – a prediction grounded in the expected negative supply shock from trade barriers. That may no longer hold. We are now facing a massive demand shock as well – triggered by financial turmoil. These shocks pull inflation in opposite directions, but they both weigh heavily on global growth.

Regardless of how inflation evolves, the result is clear: we are heading for an economic downturn, and it’s one made in Washington.

A one-man-made disaster

There should be no doubt in anyone’s mind – this was triggered by one man: President Donald Trump. His popularity is likely to plummet in the coming days and weeks. This feels like a Nixon moment – a turning point where the political tide may finally turn against him in earnest.

The Trump administration however keeps on telling everybody that the tariffs are great while global markets are in a free fall.

This leaves the responsibility to act squarely on the shoulders of the Federal Reserve and its global peers. I expect that we will see coordinated central bank intervention very soon – perhaps as early as today Monday – to stabilise markets and ensure global liquidity, similar to what we witnessed during the COVID-19 lockdown crisis in 2020.

The need for restraint – and rebellion

I can only hope that the EU resists the urge to escalate. Any talk of retaliatory tariffs against the U.S. must be shelved for now. If Europe retaliates, the situation will worsen dramatically.

Back in February, in a moment of sheer frustration, I wrote that Donald Trump would no longer be president within three months. That possibility is looking increasingly plausible.

We may soon see a bipartisan revolt in Congress – with Republican lawmakers joining Democrats to strip Trump of his ability to implement further tariff increases. At this stage, it may be the only viable political route to contain the damage.

Moreover, I believe there’s an increasing likelihood of defections from within Trump’s own cabinet. Secretary of State Marco Rubio and Treasury Secretary Scott Bessent may choose to resign and publicly break ranks.

Will Trump back down? Unlikely. He will almost certainly blame the “globalists” – the banks and the media – for the chaos. That means we should brace for more erratic and desperate actions from the president. But such moves will only serve to further erode his support within the Republican Party.

Remove Trump and this crisis ends.

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