Asian stocks drop, bonds jump as Trump tariffs sap risk

Stocks plunged and haven assets rallied as investors rushed for safety after US President Donald Trump unveiled reciprocal tariffs that were more aggressive than expected, sparking concerns over inflation and growth.

S&P 500 futures sank over 3.5% while contracts on the Nasdaq 100 slid 4.5%. Shares in Australia, Japan and South Korea tumbled at the open Thursday. US 10-year Treasury yields slumped with the flight to havens also lifting the Japanese yen and gold, which touched a new record high.

Trump said Wednesday he will apply a minimum 10% tariff on all exporters to the US and slap additional duties on around 60 nations. That includes substantially higher rates on some of top trading partners, such as China, the European Union and Vietnam.

Two months into Trump’s presidency, sentiment in Wall Street has turned from optimism to nervousness as market participants remain wary about how the levies will impact global growth. Central banks have started to factor in the potential inflationary impact from the duties and equity strategists have trimmed their forecasts for US stocks as investors stay concerned about retaliation to the US tariffs from countries.

“Eye-watering tariffs on a country-by-country basis scream ‘negotiation tactic,’ which will keep markets on edge for the foreseeable future,” said Adam Hetts at Janus Henderson Investors.

Trump’s announcement came after three days of gains for the S&P 500 index as hopes were dashed the tariff program would have a lighter touch. Traders across asset classes must now brace for what promises to be a grueling stretch of trade negotiations, against an economic backdrop that has shown signs of softening as companies and consumers adjust to Trump’s offensive.

Commodities that are sensitive to growth also fell. West Texas Intermediate, the US oil price, and copper, a popular measure of global output, both fell at least 2% early Thursday in Asia.

The White House said steel and aluminum imports won’t be subject to reciprocal tariffs in a move that will provide at least some relief to domestic buyers already incurring 25% duties on all imports of the key metals used in everything from automobiles to dishwashers.

Treasury Secretary Scott Bessent urged US trading partners against taking retaliatory steps against Trump’s new set of tariffs. “As long as you don’t retaliate this is the high end of the number,” Bessent told Bloomberg Television.

The tariffs “should slow trade and raise prices squeezing profit margins,” said Michael O’Rourke at JonesTrading Institutional Services. “This will further slow a decelerating economy as it it creates friction and distortion in global trade. I think we need to expect retaliation, which will likely lead to further escalation.”

Among the gloom some saw pockets of optimism. To Steve Chiavarone at Federated Hermes, Wednesday’s announcement could mark the most draconian levels of tariffs, and subsequent trade negotiations could lead to lower rates, which would be good for markets.

“This may create enough of a selloff over the next day or so that it creates a buying opportunity,” Chiavarone said. “Worst case scenario today would’ve been a low rate with threats of escalation. I’d rather, at this point, have higher rates with the potential to deescalate.”

Stocks Hit

Shares of companies linked to sectors that will be hardest hit by the new round of levies were sharply lower in late New York trading. Nike Inc., Gap Inc. and Lululemon Athletica Inc. all fell at least 7%. They rely on goods and factories from Vietnam. Apple Inc., whose supply chain is heavily dependent on China, fell as much as 6.9%. Chipmakers such as Nvidia Corp. and Advanced Micro Devices Inc. were down, as were multinationals Caterpillar Inc. and Boeing Co.

Prior to the tariff announcement, China had taken steps to restrict local companies from investing in the US, according to people familiar with the matter. The move could give Beijing more leverage for potential trade negotiations with the Trump administration.