A chaotic week for markets saw US equities on a volatile ride as Trump’s tariff policy sent shockwaves through global financial markets. Investors fled traditional safe-haven assets, with long-term Treasurys experiencing their largest upside swing since 1982 and the US dollar weakening sharply against foreign currencies.
Concerns over stagflation, where growth stalls, inflation persists, and unemployment rises, have kept Wall Street on edge about the impact of shifting trade dynamics. However, investors’ response has been unusual, with no corresponding move to safe havens like bonds or US currencies. Instead, this could signal a fundamental shift across global financial markets.
Experts point to Trump’s trade war as the primary cause of the chaos. The recent tariff increase on China has pushed the overall US average effective tariff rate to 27%, the highest level since 1903. This could lead to higher consumer prices and a potential recession.
The Federal Reserve is under pressure to address these concerns, with interest rates remaining at restrictive levels following an easing pause earlier this year. Economists warn that the Fed’s cautious stance may increase the risks of a downturn if the economy weakens.
“This huge tariff disruption has really thrown a monkey wrench into the soft landing,” said Michael Darda, chief economist and macro strategist at Roth Capital Partners. “It puts the Fed in a terrible position where now they have to worry about downside risks to growth.”
Source: https://finance.yahoo.com/news/market-chaos-signals-sell-america-trade-as-trump-tariff-whipsaw-threatens-to-upend-the-us-economys-soft-landing-133045914.html