US President Donald Trump has kicked off his second term with a series of tariffs that have sent shockwaves through global markets. The move, which includes 25% levies on imports from Mexico and Canada, is seen as a sign of a slowdown in US and global growth.
Investors are now scrambling to adjust their expectations, with the dollar plummeting and bond yields hitting a four-and-a-half-month low. The yield on 10-year Treasuries has fallen to its lowest level since October, making it an attractive investment opportunity.
However, analysts warn that the market volatility is unlikely to end soon. “It’s difficult for markets to get on with aggressive positioning given the risk of US tariff policies turning on a dime,” said Chang Wei Liang, currency and credit strategist at DBS.
The move has also led to increased uncertainty in trade, with China announcing retaliatory tariffs and Mexico and Canada preparing their responses. Investors are now expecting a global growth slowdown, which is expected to lead to an increase in US interest rate cuts.
Defensive sectors such as real estate and healthcare are seen as safe havens, while technology companies have taken a hit due to the increased uncertainty. Analysts believe that it’s unlikely Trump will bluff on his tariffs, and investors must now price in the reality of the situation.
“We’re seeing a lot of time spent by CEOs trying to understand the consequences of this,” said Goldman Sachs CEO David Solomon. “Until there’s more certainty, we have a little bit more runway time. But I think we’re going to live with a slightly higher level of volatility.”
The dollar has been particularly affected, with speculators rapidly unwinding their long-dollar bets and now shorting dollars against emerging market currencies. The fall in the dollar is seen as a sign that investors are losing confidence in Trump’s ability to deliver on his tariffs.
As markets continue to navigate this uncertainty, analysts will be watching for signs of trade negotiations and an exit ramp from escalation. However, for now, it’s clear that Trump’s tariffs have taken hold, and investors must adapt to the new reality.
Source: https://www.reuters.com/markets/investors-say-its-time-take-trump-seriously-markets-recoil-2025-03-04