LONDON: Stock markets slumped on Monday over concerns about the global economy after US President Donald Trump threatened to launch trade wars with Canada, China and Mexico. Wall Street`s three main indices fell sharply in early deals, but clawed back ground after Trump postponed the introduction of tariffs on Mexico for one month.

The London, Paris and Frankfurt stock markets finished in the red as Trump warned over the weekend that the European Union would be next in the firing line and did not rule out tariffs on Britain.

Shares in European automakers were hit particularly hard, with Volkswagen shedding 3.5pc and Jeep maker Stellantis down more than 4.5pc. VW makes some cars for the US market in Mexico, while Stellantis has factories in both Canada and Mexico. Asian stock markets finished mostly in the red.

`Investors fear that this trade war will result in a significant deterioration in the global economy,` said John Plassard, investment specialist at Swiss asset manager Mirabaud.

There was also a sharp selloff across the cryptocurrency sector, with bitcoin slumping almost 5pc before rebounding. Saturday tariff announcement `caught markets somewhat off guard, despite Trump`s prior hints`, said Daniela Sabin Hathorn, senior market analyst at brokerage Capital.com.

`The lack of a clear economic rationale behind this decision justified primarily as a measure to curb illegal immigration and fen-tanyl imports has unsettled investors, Sabin Hathorn said.

Oil prices jumped as the US leader imposed tariffs of 10pc on Canadian oil imports, but they later gave up the gains. The US dollar yoyoed against major currencies, including the Mexican peso and Canadian dollar. Analysts warn that the tariffs could fuel inflation and drag down economic growth.

The so-called Magnificent 7 tech stocks include Tesla, which has a factory in Canada and saw its shares slump 4.7pc. Shares in Apple fell 4.0pc and chipmaker Nvidia dropped 2.6pc. Trump`s tariff threats against Europe overshadowed a defence summit in Brussels on Monday.

Tariff halt on Mexico US President Donald Trump paused tariffs on Mexico for one month after last-minute talks on Monday but there was no breakthrough yet in negotiations with Canada on an issue that has sparked fears of a global trade war. As world markets slumped, Trump and his Mexican counterpart Claudia Sheinbaum both announced the halt in the levies after she agreed to send 10,000 troops to the US-Mexico border following talks on Monday.

Trump announced on Saturday 25 per cent levies on imports from Canada and Mexico and 10pc duties on Chinese goods. Trump said on his Truth Social network that after the `very friendly conversation` he had `agreed to immediately pause the anticipated tariffsfor a one month period.` During that time there would be further talks `as we attempt to achieve a `deal` between our two Countries, the Republican said.

Leftist Sheinbaum had announced the tariff pause a few minutes earlier, saying she had a `good conversation with President Trump with great respect for our relationship and sovereignty.` Trump agreed to increase measures to prevent trafficking of US weapons into Mexico, she said a point that did not appear in Trump`s statement. Trump said he had also spoken to Canadian Prime Minister Justin Trudeau on Monday and was due to speak again at 3pm but the White House said negotiations with Ottawa were not going as well.

Raising oil output Opec+ agreed to stick to its policy of gradually raising oil output from April on Monday and removed the US government`s Energy Information Administration from the sources used to monitor its production and adherence to supply pacts. Opec+ and Donald Trump clashed repeatedly during his first administration in 2016-2020 when the US President demanded it raise production to compensate for the drop in Iranian supply, which resulted from US sanctions.

Trump has already called on Opec to release more oil to bring down prices since returning to the White House, saying elevated prices have helped Russia continue the war in Ukraine.-Agencies