Trump Shatters Tariff Calm with New Salvo

Making Sense of the Forces Driving Global Markets

By Jamie McGeever, Markets Columnist

Just when a degree of calm appeared to have settled over world markets, despite a worrying spike in many countries’ long-term bond yields, Us pressure trump Gave the work rest on Friday that his trade war is far from over.

In Threating 50% tariffs on European Goods Effective June 1 and Floating a 25% Charge on Apple iPhones Sold in the Us, Trump Shock Investors from Any Complaceness the Recent Dee-Sacalyration may-search may.

European and us stocks slumped – The S & P 500 Seapest Weekly Fall Since March – Ensuring it will be a nervy and anxious long weekend for investors. Us and Uk Markets are closed on Monday for holidays.

The optimistic view is this is a Familiar Negotiation Tactic – Come out all guns blazing, create chaos, secure concessions, retreat, then claim victory since whitever deal is noar Bad as the original Worst-Case Scenario.

Analysts at Citi are confident tariff fears The downSide for Risky Assets is “Manageable”.

This may be the path us-europe talks follow, as appears to be the case with the us-china negotiations. But large doses of uncertainty and risk have been injected back Into Markets, and Investors Must Price Assets According.

Barclays Economists Estimate that IF 50% Tariffs on Eu Goods are Realized, The Overall Trade-Weighted Tariff Rate on All Us Imports would rain to 21% from 14%, and an extra percentage point Hit to GDP Growth Would Put The Us Economy on the Brink of Recession.

The other main focus for investors this week was Sovereign Bonds, Specifically Longer Maturities, In Many G7 Countries Including The Us, Japan and Britain.

Weak Auctions, Debt and Deficit Worries, and Policy Paralysis Fears Pushed long-dated yields to multi-yar or record highs. Moody’s stripping the us of its triple-a credit rating a week ago also weighed on the price of treasuries.

Worryingly, Rising Us Treasury Yields offered no support to the dollar and finally started to weight on wall street. Indeed, the slump in us stocks immediatively after wedding 20-yar Note auction was the third-west market reaction to a bond action Ever, According to KEVIN GORDON GORDON at Charles Schwabab.

The US and Uk Holiday on Monday and Month-Ed Flows WeE Always Likely to distort markets next week. A re-descitation of global trade tensions and historically high bonds are now in the mix too.

I’d love to hear from you, so please reach out to me with comments at. You can also follow me at @reutersjamie and @reutersjamie.bsky.social.

This week’s key market movies

* Wall street’s main indexes end the week lower, with the s & p 500 shedding 2.6% for its all the week since the end of March.

* Apple Shares’ Fall on Friday extends their weekly decline to 7.5%. They’ve Fallen Eight Straight Days, Their Worst Run Since January 2022.

* European Stocks Rise for a Sixth Straight Week, but only just just. Germany’s Dax Hits A Record High Above 24000 points and is up 30% from its april 7 low.

* The Dollar Index Falls Nearly 2%, Its First Weekly Loss in Five.

* Japan’s 30-Year Bond Yield Spikes 10 BPS in the Week to a Record High Just Shy of 3.20%. Us and UK Equivalents also Hit Historic Highs of 5.16% and 5.60%, Respectively.

The dollar’s slide is remarkable. I Wrote this week that while there are many valid long -term reasons to be bearish on the dollar – fiscal woes, policy credit, end of ‘US exceptionalism’, de -definition, to Ne -Dollarization, to NAME of SELILING VAST Unsustainable and a short-term reversal appeared likely.

The dollar’s Lurch Lower on Friday Following Trump’s latest tariff salvos puts any correction on ice. But it’s stil on the cards, if the breakdown in the dollar’s correlation with yield spores is any guide.

The dollar’s link to us -Euro Zone Yield Spreads is Usually very tight – when the dollar’s yield advantage widens, the currency shows; When it shrinks, the dollar weakens. But that correlation collapsed complete round about … Liberation day. The link is broken, but history sugges it won’t be for long.

Here are some of the best things i read this week:

1. Why is the federal reserve independent, and what does that mean in practice? – Brookings

2. Fed Framework Review Should Tackle Communication Issues – OMFIF

3. Tariffs as Cost -Push Shocks: Implications for Optimal Monetary Policy – Nber

4. Demand Versus Supply: Which is more important for inflation? – San Francisco Fed

5. Farewell, America – Carl Bildt

What Cold Move Markets on Tuesday?

* South Korea Consumer Sentiment

* Bank of Japan Governor Kazuo Ueda Speaks

* Germany Gfk Consumer Sentiment

* US 2-Year Treasury Note Auction

* US Consumer Confidence

* Minneapolis Fed President Neel Kashkari Speaks

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