Asian stock markets have fallen dramatically amid escalating fears of a global trade war – as Donald Trump called his tariffs “medicine” and showed no sign of backing down.

Hong Kong’s Hang Seng index of shares closed down 13.2% – its biggest one-day drop since 1997, while the Shanghai composite index lost 7.3% – the worst fall there since 2020.

Elsewhere, Japan’s Nikkei 225 lost 7.8%, while London’s FTSE 100 was down 4.85% by 9am.

Tariffs latest – FTSE falls after Asian markets tumble

US stock market futures signalled further losses were ahead when trading begins in America later.

At 4am EST, the S&P 500 futures was down 4.93%, the Dow Jones 4.32% and the Nasdaq 5.33%.

Markets are reacting to ongoing uncertainty over the impact of President Trump’s tariff regime on goods imported to the US, which he announced last week.

Speaking on Air Force One on Sunday, Mr Trump said foreign governments would have to pay “a lot of money” to lift his tariffs.

“I don’t want anything to go down. But sometimes you have to take medicine to fix something,” he said.

The US president said world leaders were trying to convince him to lower further tariffs, which are due to come into effect this week.

“I spoke to a lot of leaders, European, Asian, from all over the world,” Mr Trump told reporters.

“They’re dying to make a deal. And I said, we’re not going to have deficits with your country.

“We’re not going to do that because to me, a deficit is a loss. We’re going to have surpluses or, at worst, going to be breaking even.”

Mr Trump, who spent much of the weekend playing golf in Florida, posted on his Truth Social platform: “WE WILL WIN. HANG TOUGH, it won’t be easy.”

On Saturday, US customs agents began collecting Mr Trump’s baseline 10% tariff.

Higher “reciprocal” tariffs of between 11% and 50% – depending on the country – are due to come into effect on Wednesday.

President Trump believes his policy will ultimately make the US richer, creating jobs and forcing companies to relocate more of their manufacturing to America.

However, his announcement has jolted economies around the world, triggered retaliatory levies from China and sparked fears of a global trade war.

Investors and world leaders are unsure whether the US tariffs are here to stay or a negotiating tactic to win concessions from other countries.

Richard Flax, chief investment officer at Moneyfarm, said: “I guess there was some hope over the weekend that maybe we would see this as part of the start of a negotiation.

“But the messages that we’ve so far seen suggest that the President Trump is comfortable with the market reaction and that he’s going to continue on this course.

Goldman Sachs has raised the odds of a US recession to 45%, joining other investment banks that have also revised forecasts.

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In the UK, Sir Keir Starmer has promised “bold changes” and said he would relax rules around electric vehicles as British carmakers deal with a new 25% US tariff on vehicles.

The prime minister said “global trade is being transformed” by President Trump’s actions.

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Meanwhile, KPMG warned tariffs on UK exports could see GDP growth fall to 0.8% in 2025 and 2026.

The accountancy firm said higher tariffs on specific categories, such as cars, aluminium and steel, would more than offset the exemption on pharmaceutical exports, leaving the effective tariff rate on UK exports around 12%.

Yael Selfin, chief economist at KPMG UK, said: “Given the economic impact that tariffs would cause, there is a strong incentive to seek a negotiated settlement that diminishes the need for tariffs.

“The UK automotive manufacturing sector is particularly exposed given the complex supply chains of some producers.”

The Pope has appeared before cheering crowds at the Vatican.

It was the pontiff’s first official public appearance since he was released from hospital a fortnight ago.

Pope Francis, 88, had spent five weeks in Rome’s Gemelli hospital as he was treated by doctors for a life-threatening bout of double pneumonia.

The Pope, in what was a previously unannounced move, entered St Peter’s Square in a wheelchair shortly before noon local time at the end of the celebration of a mass for the Catholic Church’s Jubilee year.

In front of the main altar for the service, Francis waved to applauding crowds, before briefly talking.

Speaking in a frail voice while receiving oxygen via a small hose under his nose, he said: “Happy Sunday to everyone. Thank you so much.”

A message prepared by the Pope and released by the Vatican said he felt the “caring touch” of God.

“On the day of the jubilee of the sick and the world of healthcare, I ask the Lord that this touch of his love may reach those who suffer and encourage those who care for them,” said the message.

“And I pray for doctors, nurses and health workers, who are not always helped to work in adequate conditions and are sometimes even victims of aggression.”

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Francis had been out of public view since 23 March, when he had given a short greeting before being discharged from hospital.

The pontiff’s voice sounded stronger this time than when he addressed well-wishers outside Gemelli and struggled to speak.

Francis usually offers a weekly noon-time prayer in St Peter’s Square on Sundays.

But he has not been able to do this since 9 February, before going to hospital.

He was admitted to Gemelli on 14 February for a bout of bronchitis that developed into double pneumonia.

This is a particularly serious condition for him as he had pleurisy as a young adult and had part of one lung removed.

The IDF says it mistakenly identified a convoy of aid workers as a threat – following the emergence of a video which proved their ambulances were clearly marked when Israeli troops opened fire on them.

The bodies of 15 aid workers – including eight medics working for the Palestine Red Crescent Society (PRCS) – were found in a “mass grave” after the incident, according to the head of the UN Office for Coordination of Humanitarian Affairs Jonathan Whittall.

The Israeli military originally claimed an investigation found the vehicles did not have any headlights or emergency signals and were therefore targeted as they looked “suspicious”.

But video footage obtained by the PRCS, and verified by Sky News, showed the ambulances and a fire vehicle clearly marked with flashing red lights.

In a briefing from the IDF, it said the ambulances arrived in the Tel Sultan neighbourhood in Rafah shortly after a Hamas police vehicle drove through.

An IDF surveillance aircraft was watching the movement of the ambulances and notified troops on the ground. The IDF said it will not be releasing that footage.

When the ambulances arrived, the soldiers opened fire, thinking the medics were a threat, according to the IDF.

The soldiers were surprised by the convoy stopping on the road and several people getting out quickly and running, the IDF claimed, adding the soldiers were unaware the suspects were in fact unarmed medics.

An Israeli military official would not say how far away troops were when they fired on the vehicles.

The IDF acknowledged that its statement claiming that the ambulances had their lights off was incorrect, and was based on the testimony from the soldiers in the incident.

The newly emerged video footage showed that the ambulances were clearly identifiable and had their lights on, the IDF said.

The IDF added that there will be a re-investigation to look into this discrepancy.

Analysis: Video undermines Israel’s account of aid worker deaths

Addressing the fact the aid workers’ bodies were buried in a mass grave, the IDF said in its briefing this is an approved and regular practice to prevent wild dogs and other animals from eating the corpses.

The IDF could not explain why the ambulances were also buried.

The IDF said six of the 15 people killed were linked to Hamas, but revealed no detail to support the claim.

The newly emerged footage of the incident was discovered on a phone belonging to one of the workers who was killed, PRCS president Dr Younis Al Khatib said.

“His phone was found with his body and he recorded the whole event,” he said. “His last words before being shot, ‘Forgive me, mom. I just wanted to help people. I wanted to save lives’.”

Sky News used an aftermath video and satellite imagery to verify the location and timing of the newly emerged footage of the incident.

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It was filmed on 23 March north of Rafah and shows a convoy of marked ambulances and a fire-fighting vehicle travelling south along a road towards the city centre. All the vehicles visible in the convoy have their flashing lights on.

The footage was filmed early in the morning, with a satellite image seen by Sky News taken at 9.48am local time on the same day showing a group of vehicles bunched together off the road.