New throughout, updates prices after U.S. market open

By Sinéad Carew, Nupur Anand and Amanda Cooper

NEW YORK/LONDON, April 3 (Reuters) - President Donald Trump's new tariffs sent shockwaves through global financial markets on Thursday, with the dollar and U.S. stocks among the hardest hit on fears that a broadening trade war would push an already fragile world economy into recession.

Trump's 10% baseline levy on all U.S. imports, with much higher duties imposed on some countries, sent investors fleeing risky assets as they worried Trump was upending global trade.

And, with the prospect of higher prices in an already slowing U.S. economy that depends on the consumer for growth, investors bet on a much higher likelihood for a recession.

"It's just left everybody in shock," said Garrett Melson, portfolio strategist at Natixis Investment Managers Solutions in Boston, adding that "a lot of the pain, will probably most acutely be felt in the U.S. and that certainly would weigh on broader global growth as well."

Melson pointed out that investors were also grappling with a lot of unanswered questions.

"We've details but there's absolutely no clarity," he said. "We have numbers and we have an idea of how they got to those numbers ... but we don't know how long these are going to stick. We don't know if there's really any room for negotiating."

So far, what the U.S. has said is that the base 10% tariffs will go into effect on April 5 and the higher rates on April 9.

Tariffs of 25% on vehicle imports took effect at midnight. The new levies include a 34% tariff on imports from China, 46% on Vietnam, 24% on Japan and 20% on Europe.

Retaliation against Trump's tariffs is likely, said Justin Onuekwusi, chief investment officer at St James's Place, "but it's clear countries will think about how to retaliate in a politically astute way."

"Significant retaliation could lead to a tariff 'spiral of doom' that could be the growth shock that drags us into recession."

Trump called Wednesday "Liberation Day," but U.S. investors joined the selloff along with those in Asia and Europe. The dollar =USD fell sharply against major currencies and the S&P 500 .SPX tumbled more than 4% while the Nasdaq composite .IXIC dived more than 5%.

In U.S. Treasuries 10-year yields US10YT=RR fell to just above 4%, their lowest level since mid-October.

On Wall Street, the biggest drags on the S&P 500 were from highly valued megacap investor favorites such as Apple AAPL.O and Amazon.com AMZN.O, both down around 8% and artificial intelligence chip leader Nvidia NVDA.O, down about 5%.

Consumer discretionary .SPLRCD, off more than 6%, led declines in the S&P's 11 major industry indexes. The defensive consumer staples .SPLRCS sector was the biggest gainer, up more than 1%.

European shares fell with the STOXX 600 .STOXX down 2.7%. The euro EUR=EBS was up more than 2% against the dollar.

Fed funds futures rallied as investors priced in a higher chance of the Federal Reserve cutting interest rates. 0#FF:

The U.S. dollar index =USD sank to a six-month low with the greenback falling the most against safe havens, putting it off 2.6% against the yen JPY=EBS and down about 3% against the Swiss franc CHF=EBS. FRX/

Eric M. Clark, a portfolio manager at Alpha Brands in California, noted that S&P 500 companies get over 40% of their revenue from overseas.

"This raises the risk of recession here even higher," he said.

'NO ONE LIKES WHAT THEY SEE'

Announcing the levies, Trump spoke in terms of fairness, arguing that "reciprocal" tariffs were a response to duties and other non-tariff barriers placed on U.S. goods.

"In many cases, the friend is worse than the foe in terms of trade," Trump said, calling it a declaration of independence.

European Union chief Ursula von der Leyen described the tariffs as a major blow to the world economy and said the 27-member bloc was prepared to respond with countermeasures.

Some investors saw Trump's speech as a starting point for negotiation. In markets such as China, which had braced for tariffs and where most revenue is earned locally, selling in stocks and the currency was more contained.

The market had already swooned on jitters about tariffs. In mid-March the S&P 500 confirmed a correction, a drop of 10% from a recent high. The index finished Wednesday's regular trading session 8% below its February record high.

"People were talking earlier about whether clarity would boost the market," said Jeanette Garretty, chief economist at Robertson Stephens.

"But now you have clarity, and no one likes what they see."

(Additional reporting by Amanda Cooper, Dhara Ranasinghe and Lucy Raitaino in London; Graphics by Pasit Kongkunakornkul; Writing by Tom Westbrook; Editing by Shri Navaratnam, Bernadette Baum and David Gregorio)

((sinead.carew@thomsonreuters.com; +13322191897;))