U.S. Tariff Shock and Treasury Yield Spike Jolt Global Markets

Tariff Shock Rattles Markets as Treasuries Send Mixed Signals

U.S. equity futures slumped further Wednesday after President Trump’s sweeping tariffs took effect, intensifying a sell-off that has dragged the S&P 500 near bear market levels. At the same time, a surprising rise in Treasury yields is raising new concerns about investor confidence in traditional safe havens.

Are Tariffs the Catalyst for a Broader Markethas dragged the S&P 500 near bear market levels Breakdown?

The 104% duties on Chinese imports became active just after midnight, expanding to cover dozens of other countries under the administration’s “reciprocal tariffs” policy. Canada was quick to retaliate with 25% duties on U.S. vehicles.

In early trading, S&P 500 futures dropped 0.4%, Dow futures fell 248 points, and the Nasdaq-100 eked out modest gains led by resilient tech names. Since last week’s tariff announcement, the S&P has lost more than $5.83 trillion in market value, leaving it just shy of a 20% decline from recent highs.

Why Are Treasury Yields Rising During a Risk-Off Event?

In a striking departure from historical patterns, the 10-year Treasury yield surged 11 basis points to 4.37%, its highest level since February. Rather than flocking to bonds, investors are pulling capital from Treasuries—suggesting growing doubts about their reliability as a haven. “The selloff in Treasuries is incredibly aggressive,” said Deutsche Bank’s Henry Allen, noting the shift may reflect concerns over U.S. fiscal stability and the broader economic drag from tariffs.

Will the Fed Step In as Rate Cut Bets Surge?

Rate cut expectations have moved sharply. Traders now fully price in four 25-basis-point cuts by year-end, with some even anticipating emergency action. The VIX, Wall Street’s fear gauge, sits at 49.1—near levels last seen in major crisis periods. With inflation data and Fed meeting minutes due this week, markets are highly sensitive to any signs of a pivot in policy tone.

Can China Stocks Keep Defying the Global Selloff?

While U.S. and global equities retreat, U.S.-listed Chinese firms are moving higher. Alibaba gained 7%, PDD Holdings rose 3.5%, and the iShares MSCI China ETF added 5.8%—driven by domestic intervention from Chinese state entities. The rally stands in contrast to broader weakness in industrial commodities and global indices.

Short-Term Outlook: Bearish with Heightened Volatility

With equity markets nearing bear territory, Treasury yields rising during stress, and Fed rate cuts now priced aggressively, the short-term view remains bearish. Traders should expect volatility to stay elevated, especially with key inflation prints and Fed guidance on deck.

More Information in our Economic Calendar.