Markets cower as 104% tariffs on China begin

A look at the day ahead in European and global markets

By Ankur Banerjee, Asia Finance ＆ Markets Correspondent

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As the next leg of the rapidly escalating trade war comes into view, investors remain shell-shocked, extending a deep stock market rout and flocking to the safe-haven yen and Swiss franc, awaiting, and hoping, for some semblance of good news.

At the stroke of midnight (U.S. hours), President Donald Trump's reciprocal tariffs took effect, including 104% levies on Chinese goods, keeping fears of recession alive and upending a global trading order that has persisted for decades.

Price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, April 1, 2025. REUTERS/Staff/File Photo

Markets had pinned their hopes on negotiations, but so far it appears that Washington and Beijing are heading for a showdown.

That has left investors scurrying for cover as the relief rally on Wednesday fizzled out and Asian stock markets were a sea of red. European futures point to a significantly lower open on the day.

So, the yen and the Swiss franc were the go-to for nervous investors as relentless dollar selling showed no signs of stopping. In emerging markets, the Indonesian rupiah sank to a record low and was on the verge of breaching 17,000 per dollar.

The yuan weakened to a 19-month low, while its offshore counterpart inched away from the record low it hit in wild overnight trading.

And yet, the flight to safety has not included U.S. Treasuries. The yield on the benchmark 10-year note was up an eye-popping 21 basis points.

That fact that sweeping tariffs could result in a recession and markets are pricing in more interest rate cuts would normally provide a good reason to buy bonds, but that has not been the case.

ING economists said the 'sell America' trade is one that's now dominating the rising recession risk theme that typically would have pushed yields down. In short, brace yourself.

Graphics are produced by Reuters.

An item in the key developments section of Morning Bid Europe on April 8 has been corrected. The German finance minister is Joerg Kukies, not Christian Lindner.

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