Stock markets tumbled around the world in response to President Trump’s threat of tariffs.

The FTSE 100 followed a sharp fall in Asian markets, down 107 points to 8,567.16 (1.23%) after the first half-hour of trading today.

Japan’s Nikkei slumped 2.8% and the Hang Seng in Hong Kong 1% lower, although mainland Chinese markets were shut for the Chinese Lunar New Year holiday until Wednesday.

Mr Trump’s move to hit Canada, Mexico and China could put interest rate cuts on hold, with some forecasting an 18-month halt in the US.

He is expected to turn his attention to the EU, while his approach to the UK remains unclear, but it could stall the Bank of England’s plans to cut rates.

Last year, the US ran a deficit of $213bn (£173bn) with the EU, which President Trump has described as “an atrocity”.

He said the UK has been “out of line” but the situation “can be worked out”. At one point last year the US ran a surplus with the UK and Westminster hopes this will persuade the president to spare the UK from tariffs.

He added that he has been “getting along very well” with Prime Minister Sir Keir Starmer who today heads to Brussels to join an EU leaders’ meeting. Sir Keir is hoping to reset trade relations with the EU.

Yvette Cooper, the UK home secretary, yesterday warned of the negative impacts of a trade war. “Tariff increases right across the world can have a really damaging impact on global growth and trade,” she said. “We want to reduce the barriers to trade, make it easier for businesses.”

Mr Trump said a tariff of 25% on Canadian and Mexican imports and an additional 10% tax on Chinese goods would come into force on Tuesday.

The plan has led economists to warn that the resulting inflation would make it significantly harder for the Fed to cut interest rates.

Paul Ashworth, chief North America economist at Capital Economics, said the tariffs would prove inflationary and force the Fed to put the brakes on its rate cutting plans.

“The window for the Fed to resume cutting interest rates at any point over the next 12 to 18 months just slammed shut,” he said.

Earlier this month the World Bank said tariffs are major threat to global growth this year.

On Truth Social, Mr Trump said: “Will there be some pain? Yes, maybe (and maybe not!). But we will make America great again, and it will all be worth the price that must be paid.

“The USA has major deficits with Canada, Mexico, and China (and almost all countries!), owes 36 Trillion Dollars, and we’re not going to be the ‘Stupid Country’ any longer.”

Canada, Mexico and China said they would retaliate by imposing similar tariffs on goods imported from the US.

UK companies fear a repeat of the tariffs impose by Mr Trump between 2019 until 2021. The UK was still in the EU at the time of the decision and was caught up in a dispute over subsidies for the aircraft-makers Boeing and Airbus.

A 25% tariff on single malt whisky cost the industry £600m, according to the Scotch Whisky Association.