Asian stock markets sank overnight as Donald Trump’s sweeping “liberation day” tariffs came into force, intensifying global trade tensions.
Tokyo’s Nikkei 225 dropped nearly 5% after Japan was hit with a 24% tariff on all exports to the U.S. shortly after 5am UK time. In Hong Kong, the Hang Seng index initially plunged as much as 4.3% following the imposition of 104% tariffs on Chinese goods. Although it later recovered most of its losses, the index had already endured its worst trading day since 1997 earlier in the week.
In the U.S., Tuesday’s optimism on Wall Street quickly faded. The S&P 500 — which had been up more than 4% on hopes of a U.S.-China breakthrough — reversed course to end more than 2% lower as negotiations broke down.
The escalation is fueling political friction at home. Elon Musk slammed Trump’s tariff architect, calling him “dumber than a sack of bricks” after claiming Tesla cars aren’t made in the U.S.
Investor confidence in the American economy appeared to waver, with money flowing out of the dollar and U.S. government bonds. The pound rose 0.5% against the greenback to $1.283, while the euro climbed 0.8% to $1.104. The dollar also slipped 0.6% against the yen.
Yields on 10-year U.S. Treasury bonds — a key gauge of government borrowing costs — have surged 41 basis points this week, reflecting worries about their status as a safe-haven asset. In contrast, two-year bond yields have dropped as markets bet the Federal Reserve will be forced to cut interest rates. Earlier this week, traders were pricing in as many as five rate cuts for the year.
“This is a fire sale of Treasuries,” said Calvin Yeoh, portfolio manager at Blue Edge Advisors. “It’s like ice sculpting in a forest fire — whatever looked good a second ago is now gone.”
