And finally, the Dow has closed down 280 points at 27,501, a drop of almost 1%.

The prospect of a long delay to the China trade deal (if it ever comes), and the threat of France retaliating to new US tariffs on its cheese and champagne both weighed on Wall Street.

Traders, says Kyle Rodda of IG, have taken “a cold, hard dose of reality” today.

He writes:

Volatility has returned in a big way to financial markets. Stocks are down and safe-havens are finding a bid, after US President Donald Trump suggested there’s “no deadline for a trade-deal”, and implied the trade-war could be prolonged into next year. Equity markets are returning to fundamentals now.

Once again, fear has the upper hand over greed in the markets.

After several weeks of what’s been appropriately described as a sense of complacency, volatility has returned to global markets to begin December. Having been highly suppressed, as traders became giddy on the prospect of a US/China trade-deal, the VIX (the “fear index”) has spiked in the last 48 hours, climbing from a historically low 11 reading, to its current reading at 16.

That’s all for tonight! GW

Ouch! Britain’s FTSE 100 has closed at its lowest level since mid-October.

Renewed trade war anxiety sent the index down to 7,158, a loss of 127 points. That’s a 1.75% slide, to a six-week low.

The FTSE 250 index of medium-sized UK companies also had a rotten day, ending 199 points down at 20,500. That’s a 1% drop.

Wall Street is having a seriously bad day now, with the Dow shedding 421 points or 1.5%.

This takes the index down to a one-month low, wiping out all the gains made in November when the Dow hit a series of record highs.

Donald Trump and Emmanuel Macron’s press conference in London is one of the most awkward such events we’ve seen in a while.

At one stage, Trump even patronised Macron for giving a classic “non-answer”, when the French president talked about the importance of eradicating ISIS.

That came after Trump challenged him to take back French Islamist fighters captured in the region.

But on trade, Trump has also threatened France with “substantial taxes”, unless it changes its plan to tax tech giants.

“We’ve taxed wine and we have other taxes scheduled. We’d rather not do that, but that’s the way it would work. So it’s either going to work out, or we’ll work out some mutually beneficial tax,.

The tax will be substantial, and I’m not sure it’s going to come to that but it might.”

The two leaders are also clashing over Turkey, with Macron furious that it plans to buy a Russian missile system, and over its invasion of Syria.

Newsflash: Donald Trump and Emmanuel Macron are holding a press conference at the NATO summit now.

Trump seems to be trying to calm the tariff row, telling reporters that “we have a very good relationship with France”.

The US president also says that he believes the two sides can work out their clash over France’s digital sales tax. Thins s will “be looking rose” between us soon, he adds.

But, Trump is also emphasising that all NATO members need to make a fair contribution to its budget, and suggests that he could use trade as a weapon to get them into line...

The Paris stock market is also suffering a dose of tariff blues.

The CAC 40 index is down 1%, with consumer companies and factories suffering the biggest losses.

Luxury goods firm Kering is down 2.3%, with LVMH (Moët Hennessy – Louis Vuitton) losing 2%. As explained earlier, they’re in the firing line from higher tariffs on handbags and champagne.

Just in: Britain’s FTSE 100 index of top shares has hit its lowest level since late October.

The Footsie has now lost 108 points to 7,177, its weakest level in six weeks.

Donald Trump’s latest trade war escalation is causing alarm in the City, as traders fear that a deal with China could be a year away. The new tariffs being threatened on France have also raised worries that UK-EU relations could worsen.

Separately, the the rise in the pound is hurting multinationals - whose overseas earnings become less valuable in sterling terms.

Steelmaker Evraz is the top faller, down 6%, followed by NMC Health, the UAE-focused healthcare chain.

US-focused plumbing and building materials provider Ferguson has lost 3%, while global advertising firm WPP is down 2.5%.

While shares slide, the pound is rising towards its highest level in six months.

Sterling has just hit $1.30 for the first time in six weeks, and is close to levels not seen since May.

The pound often rises when opinion polls suggest Boris Johnson will win a majority next week. The latest poll shows the Conservative Party still holds a lead over Labour.

The pound is also benefitting from the weaker dollar, which took a hit from disappointing US manufacturing data yesterday.

Donald Trump has alarmed investors by declaring that he’s really in no rush to reach a trade deal with China.

In London, the FTSE 100 has slumped by 81 points or over 1% to 7,203 points, its lowest level in almost two weeks.

Mining stocks are leading the selloff, as a deeper trade war between Washington and Beijing is bad news for commodity prices.

Boom! Donald Trump has suggested that a trade deal with China could be a year away.

Asked if it could be agreed by the end of 2019, he replies that any deal is dependent on one thing - whether he wants to do it.

The president claims that America is doing “very well” from the trade war, citing the $28bn financial aid handed to US farmers. He claims this came from the tariffs paid by China -- even though tariffs are actually paid by American companies when they import goods from China.

Trump then accuses China of “ripping off the US for many, many years”, and now being desperate to end the trade war.

He adds:

In some ways I think it’s better to wait until after the election for the China deal. But they want to make a deal now.

That may alarm investors, who had been hoping for a Phase One trade deal for a while. The next US election is in November 2020.....

Just in: Donald Trump has launched a scathing attack on France’s digital tax, and its president Emmanuel Macron.

Speaking at the start of the NATO meeting in London, the US president says France is wrong to hit American tech companies with a 3% levy on their global revenues.

Trump says he’s “not in love” with Facebook, Google and Twitter - although he does do well on Twitter. But they are “our companies, American companies’, so he wants to be the one taxing them.

He tells reporters:

I’m not going to let anyone take advantage of American companies.

If anyone is going to take advantage of American companies, it’s going to be us.....

I don’t want France to be taxing American companies. If anyone’s going to tax American companies, it’s us.

So we’re putting a tax on their [France’s] wines and everything else.

Trump also criticises Macron, saying that sometimes the French president does things that are “counterproductive to his country”.

He also says it was “very insulting” of Macron to label NATO as “brain-dead”, adding that European history shows that “no-one needs NATO more than France”.

The list of French products that could incur a 100% tariff runs to 63 entries, covering food, drink, fashion, cosmetics and accessories.

It includes 22 different entries for cheese alone, including:

• Fresh cheese, Roquefort, Edam, blue-veined, Gruyere, Romano, Reggiano, Parmesan and Swiss varieties. Even cheddar is mentioned, even though that’s more of a UK delicacy.

The list also includes “Sparkling wine, made from grapes”, which appears to covers France’s champagne production as well as crémant - or fizz from other regions.

On toiletries, the list includes

• Lip make-up, eye make-up, manicure or pedicure preparations, beauty or make-up powders, and various soaps.

It also targets handbags, both with and without shoulder straps, whether they’re made of ‘reptile leather’, patent leather, braid, silk, plastic or other manmade fibres.

The US Trade Representative has also singled out 13 types of porcelain and china, including ranges for hotels and restaurants, and for households. It also singles out decanters, punch bowls, salt and pepper sets, mugs and steins.

Finally, the list includes cast iron table and kitchen products, which could cover Le Creuset-style pots.

You can read America’s ruling against France here.

In it, the US Trade Representative explains that the digital tax is unfair because it discriminates against U.S. digital companies, such as Google, Apple, Facebook, and Amazon.

In addition, the French DST is inconsistent with prevailing tax principles on account of its retroactivity, its application to revenue rather than income, its extraterritorial application, and its purpose of penalizing particular U.S. technology companies

The US is also threatening to launch similar probes into Austria, Italy, and Turkey.

Trade representative Robert Lighthizer said America wants to tackle “growing protectionism”.....

“Indeed, USTR is exploring whether to open Section 301 investigations into the digital services taxes of Austria, Italy, and Turkey.

The USTR is focused on countering the growing protectionism of EU member states, which unfairly targets U.S. companies, whether through digital services taxes or other efforts that target leading U.S. digital services companies.”

Rome’s government has proposed a similar digital tax, which would begin in January 2020, taxing large tech firms 3% of their revenue.

Critics of trade wars point out that tariffs are effectively a tax on consumers, as they make imports more expensive.

And if America really does impose this 1o0% tariff, it could mean less French champagne and quality cheese is quaffed and scoffed in the States.

Paul Donovan of UBS fears that Camembert will be off the menu, replaced with processed cheese (and you can’t bake that in the oven with a little garlic and herbs!).

He told clients:

• US President Trump tweeted plans to tax US consumers of French champagne and cheese (and other goods). The sentiment seems to be “let them drink Coke.” Taxing trade is one of the few things the US president can do alone. Trump is branding the Democrats as “do nothing” – we may get more such tweets as a demonstration Trump is “doing something.”
  
  
• Substituting Kraft Cheese Slices for Camembert may be a heavy burden. However, earlier tweets re-imposing taxes on US users of Brazilian and Argentinian steel seem even more serious. Companies have spent years believing that they can operate global supply chains. Trust in global supply chains is threatened when a Trump trade deal does not seem to last more than a few months.

The French government is furieux about America’s threat to impose a 100% tariff on some of its most cherished exports.

Finance minister Brune Le Maire has told Radio Classique that the move is “unacceptable”, and not what you’d expect from an ally.

Le Maire also warned that Europe would retaliate, presumable with its own raft of tariffs on American imports.

“In case of new American sanctions, the European Union would be ready to riposte”

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

So much for the season of goodwill! Donald Trump has spooked the financial markets again, with a fresh flurry of tariffs that further escalate his trade war war.

Overnight, the Trump administration on Monday proposed new tariffs up to $2.4bn of French goods. Prized exports, including champagne, cheese, handbags, porcelain, cheeses and yoghurt would incur a new levy of up to 100%.

This swingeing move is a retaliation against France’s new digital services tax, which Washington says unfairly discriminated against American technology companies such as Amazon, Google and Facebook.

US Trade Representative Robert Lighthizer declared that the move:

“sends a clear signal that the United States will take action against digital tax regimes that discriminate or otherwise impose undue burdens on US companies.”

The move casts a shadow over today’s meeting of NATO leaders in London, to celebrate the 70th anniversary of the military alliance.

The attack on French exporters came just hours after Trump announced he was raising tariffs on steel and aluminium from Brazil and Argentina, in retaliation for their currencies falling to record lows.

That knocked stocks across the globe, with European stock markets suffering their worst day in two months on Monday. Wall Street also suffered, with the Dow losing almost 1%.

The selloff is now spreading to Asia, where Australia’s S&P/ASX 200 has slumped by over 2%.

Hopes that Trump might secure a trade deal with China had driven markets higher in recent weeks; investors are now worrying that America could take a more belligerent approach. Tariffs restrict trade and drag on global growth, so any escalation is bad news for the global economy.

Jasper Lawler of London Capital Group says Trump’s latest barrage of tariffs has surprised the markets.

The US placing steel and aluminium tariffs on Argentina and Brazil caught markets off guard. Traders have had US-China trade tunnel vision. As Americans would say, this came out of left field.

The new tariffs in South America are a reminder that with Trump as US President, a phase one trade deal with China doesn’t mean global trade just resets to the old status quo.

As I type, France is vowing to hit back, so it could be a tense day....

The agenda

• 9.30am GMT: UK construction PMI for November: Expected to rise to 44.5, from 44.5, showing another contraction