Tariff War Slams Markets as Stocks, Bonds, and Commodities Tumble

Tariff War Rattles Global Markets as Stocks, Bonds, and Commodities Take a Hit

Global markets took a sharp downturn Tuesday after the United States imposed steep tariffs on Canada, Mexico, and China, igniting fresh trade tensions with its top three trading partners.

Stocks, bond yields, and key commodities all slid as investors assessed the fallout from escalating trade conflicts, while retaliatory measures from affected nations raised fears of prolonged economic disruption.

How Are Stocks Reacting to the Tariff Shock?

Equity markets worldwide faced heavy selling pressure, with Europe’s STOXX 600 index falling 1.3%, driven by a steep 4.3% decline in auto stocks—one of the sectors most vulnerable to trade disruptions. In the U.S., S&P 500 futures dipped 0.3%, while the Dow Jones Industrial Average fell 79 points in pre-market trading. The S&P 500, already 5% off its February high, has now posted its worst daily loss since December, dropping 1.8%.

Asian markets mirrored these losses, with Japan’s Nikkei falling 1.2% and Taiwan’s benchmark index dropping 0.7%. Investors rushed to safer assets, sending U.S. 10-year Treasury yields to their lowest since October at 4.164%, while German 10-year bonds also saw declines.

China, Canada, and Mexico Retaliate—What’s Next?

China wasted no time responding, announcing 10%-15% tariff hikes on $21 billion worth of U.S. agricultural and food products. Additionally, Beijing placed 25 U.S. firms under export and investment restrictions and warned of further retaliatory steps if tensions persist.

Canada and Mexico, which have enjoyed a tariff-free trade relationship with the U.S. for decades, also hit back. Canada announced immediate 25% tariffs on $20.7 billion worth of U.S. imports, with a second wave of levies planned if tariffs remain in place for 21 days. Mexico is expected to follow suit, raising further concerns about supply chain disruptions across North America.

Commodity Markets Take a Hit—Where Do Oil and Metals Stand?

The energy market was not spared, with Brent crude falling 0.9% to $70.72 per barrel, its lowest level since December. Reports indicate OPEC+ will proceed with its planned oil output increase in April, a move that could keep pressure on prices.

Meanwhile, industrial metals, a key indicator of global trade activity, also softened. Gold held steady as a safe-haven asset, but copper and aluminum prices saw declines amid fears of weakening global demand.

Will Inflation and Economic Growth Take a Hit?

Market participants are increasingly concerned that the tariffs could exacerbate inflationary pressures in the U.S.. Data released Monday showed that U.S. factory gate prices surged to their highest level in nearly three years, raising fears that tariffs on imports will increase production costs.

The U.S. dollar weakened 0.2%, near a three-month low, as traders bet on potential policy shifts from the Federal Reserve if trade tensions weigh further on economic growth. At the same time, the Mexican peso and Canadian dollar lost ground, reflecting concerns about their economies’ exposure to new trade barriers.

Market Outlook—Bearish Sentiment to Persist?

The immediate reaction suggests that markets remain highly sensitive to escalating trade tensions. The sell-off in equities, bond yields, and risk assets signals a shift toward caution, and traders should brace for continued volatility.

If retaliatory tariffs deepen and further disrupt global supply chains, corporate earnings expectations could come under pressure, particularly in sectors such as manufacturing, agriculture, and consumer electronics.

For now, the market sentiment remains bearish, with traders closely watching any diplomatic developments. Without a resolution, further downside pressure on equities and risk assets appears likely, while safe-haven assets such as bonds and gold could see continued support.

More Information in our Economic Calendar.