As import taxes on goods entering the United States are significantly higher, turmoil spreads across the financial markets. The rout has intensified as China’s intensified retaliation, saying it will impose a 50% tariff on U.S. imports to match the Trump administration’s escalation.
Stocks have fallen, but turbulent people have also hit the government bond market, a somewhat counterintuitive shift that has left investors and analysts speculating on what prompted it. Treasury has traditionally been seen as a safe haven during economic turmoil because they provide investors with guaranteed payments backed by the U.S. government.
Instead, they keep falling. The yield on the 10-year Treasury bill rose as investors sold their assets, jumping to its highest since February on Wednesday to its highest 4.47%.
President Trump announced a full tariff announcement on most U.S. trading partners. These take effect at midnight on Wednesday, with tax rates exceeding 100% for imports from China. Beijing also raised its own tariffs on the United States, with an additional 50% tax imposed on Wednesday that would bring U.S. exports to China to 84%.
The EU plans to vote on its first retaliation measures on Wednesday afternoon.
In the stock market, futures of the S&P 500 have caused investors to bet on the index’s direction as trading resumes in New York, down about 1.8%. The index closed on Tuesday’s trading above bear territory, down 20% from its recent peak, a symbolic and relatively rare and worrying threshold for investors.
Most Asian stocks were down: Taiwan’s worst stocks, sinking more than 5%; Japan’s benchmark index fell more than 3% and South Korea nearly 2%. Stocks listed in Shanghai rose slightly.
STOXX Europe 600 fell by more than 4%. London’s FTSE 100 fell more than 3% along with benchmark indexes in Frankfurt, Paris and other European financial capitals.
The dollar’s one-dollar index against other major currencies also slid on Wednesday, approaching its lowest level in six months, with oil prices falling.
“We are entering an unknown territory in the global financial system,” George Saravelos, head of global foreign exchange research at Deutsche Bank, wrote in a note: “We are entering an unknown territory in the global financial system,” George Saravelos, head of global foreign exchange research at Deutsche Bank, simultaneously lowered the prices of all U.S. assets, including stocks, dollar and bond markets. “In the next few days, it’s hard to foresee the market trend.”
Analysts at Rabobank, a Dutch financial firm, pointed out that the market is in a “strange situation”: Treasury yields are climbing, while bets are increasing, and the Fed has lowered interest rates. They cited several possible reasons for the volatility of the bond market, including warnings that investors hold long-term bonds in situations of such high uncertainty; or traders cleared bond holdings to meet margin calls when banks requested additional collateral to cover potential losses of assets purchased with borrowing money. The yield on the 30-year bond jumped from 4.4% on Friday to 4.9% on Wednesday.
Goldman Sachs analysts said late Tuesday that the recent sharp shift in treasury and other markets “indicates that market functions may deteriorate there with a higher risk.”
Analysts at research firm Fitch Solutions BMI said Asian economies will be restricted by increased tariffs by Mr. Trump. They said there could be “massive revisions” when they wait “a few days” to see if the state can negotiate tariffs, but there could be “massive downward revisions” in terms of forecasting growth.
Government officials seem to have opened the door to negotiations, which could eventually weaken the trade war, citing dozens of countries approached the U.S. government to reach a deal in recent days.
But White House officials tried to set high standards for lawyers the president would be willing to accept, marking a shift in tone after Mr. Trump and his aides initially said they would not get involved in the tariffs at all.
Treasury Secretary Scott Bessent said the United States does not intend to back down after China retaliates against President Trump’s tariffs. “They are surplus countries,” he said on Wednesday at the Fox business. “They export to the United States is five times as much as they export to China. So, they can raise tariffs, but what?”
Earlier this week, Japan became the first major economy to secure priority tariff negotiations with the Trump administration. The news triggered a brief increase in Tokyo-listed stocks, which they then resumed falling on Wednesday.
