Risk assets trampled as Trump touts tariffs for all

A look at the day ahead in European and global markets

By Wayne Cole, Chief Correspondent, Treasury

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It's been a rocky start to the week in Asia as a rush from risk left stocks down across the board, while bonds extended their rally and gold rose to another record.

Sentiment was fragile enough ahead of the announcement of U.S. tariffs on Wednesday but President Trump made it more so by telling reporters on Air Force One that the levies would cover all countries and not just a select few. He has a habit of dropping these comments early in the Asia trading day when liquidity is lacking, and sets off big waves as a result.

People work at the trading floor of the Euronext stock exchange in the La Defense business district in Paris, France, March 10, 2025. REUTERS/Benoit Tessier

The Nikkei led the rout with a fall of 3.8%, the largest daily drop in six months, and pretty much all of Asia was in the red. Nasdaq futures shed 1.3% and the major European stock futures followed.

Trump's new-found indifference to rising car prices seemed to convince analysts he was serious about going all in. Goldman Sachs now expects reciprocal tariffs will average 15% across all U.S. trading partners. In the same note, it lifted the chance of a U.S. recession to 35%, from 20%, and the "R" word seems to be on everyone's lips.

Investors are counting on this coming slowdown to outweigh the inflationary impact of tariffs and prod the Fed into cutting rates by 75 basis points this year, though it would likely take a sharp rise in unemployment to warrant such action. Markets have around 60 bps of ECB easing priced in for this year and 50 bps for the Bank of England.

The thought of all this easing, combined with the flight to safety, offered comfort to bond investors. Ten-year Treasury yields fell to 4.21% from a top of 4.40% last Thursday. It's an open question whether this rally will continue once the actual inflation data start showing the impact of tariffs on prices.

For now, lower yields have dragged the dollar down on the yen, and even the euro and pound have edged higher. Yields aside, though, it may become harder for the dollar to get its usual boost as a safe harbour when the source of all this turbulence is the White House itself.

Graphics are produced by Reuters.

Graphics are produced by Reuters.

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