Markets slide as Trump unleashes 104% tariffs on China

In a striking reversal, bond markets saw a heavy selloff. The yield (which moves inversely to bond prices) on the US 10-Year Treasury Note surged from Monday, when it broke below 3.90%, to a high of 4.47% overnight. 

Investors began to question whether US government debt still qualifies as a reliable safe haven amid geopolitical and fiscal uncertainty. But there are also concerns of forced selling amid fears that something has come untethered in the complex financial plumbing on which all markets are based. 

In addition, this steep rise in yields adds to broader market pressure and raises questions about how long risk assets can stay supported if borrowing costs continue to rise.

At a White House dinner last night with Republican lawmakers, Trump defended his decision to impose the steep new tariffs on Chinese goods, citing “fairness and national interest.” 

He also announced plans to introduce new levies on foreign-made pharmaceuticals, with details expected later today.

With the trade conflict escalating on multiple fronts, the likelihood of further retaliation from China or other global partners is now firmly in play.

The Reserve Bank of New Zealand (RBNZ) cut interest rates by 25 basis points to 3.5% overnight. This was expected, and the RBNZ cited slowing economic momentum and the need for additional monetary support. 

The rate cut comes amid increasing global central bank divergence. The New Zealand dollar was a touch firmer against the US dollar in early trade. However the currency has come under relentless selling pressure since the fourth quarter of 2024.

Crude oil prices continue to slide as global demand concerns mount, and after OPEC+ announced it was raising output by three times more than expected, starting in May. 

Front-month US Light Crude fell below $56.50 overnight, hitting its lowest level since February 2021. The slide comes amid clear evidence of weakening consumption in China and rising fears that the US-China trade war will further dent growth.

Meanwhile, Brent Crude continues to trade well off its January high of $72.40, now sitting closer to the $60 mark. Analysts at Bank of America have warned that Brent could fall to $50 in a worst-case scenario, a stark reminder of how vulnerable the energy complex is to macro shocks.

The US dollar fell overnight, despite the jump in US bond yields. The USD/JPY, which had traded as high as 158.88 back in January, broke below 145.00 earlier this morning. This is a clear demonstration of the yen’s safe-haven appeal in times of stress.

Meanwhile, the euro has rallied overnight, with the EUR/USD breaking back, and holding above the key 1.1000 level. Sterling also saw decent gains, with GBP/USD back above 1.2800, though still some way below last week’s high above 1.3200.

The April Volatility Index (VIX) jumped to 44 at the height of the US selloff before easing back slightly to 39.78. While off the highs, the index remains well above the historical average and is now tracking the sustained increase in market risk and uncertainty.

Markets are once again on edge as Trump’s dramatic tariff escalation reignites fears of a prolonged trade war. The confirmation of a 104% tariff on Chinese US exports sent ripples through every major asset class, triggering a surge in volatility and steep moves across global equities, bonds, oil and FX.

With additional tariffs on pharmaceuticals expected, traders are waiting to hear how China will respond while preparing for more headline-driven swings. US Treasury bonds no longer provide the traditional safety net, while crude remains under pressure as growth concerns mount.

Expect another volatile session ahead, with tariff headlines, Fed expectations, and global policy shifts all competing for the market’s attention.