Global Markets Sink as U.S. Tariffs Shake Investor Confidence

— by wiobs

Asian stocks tumble after President Trump announces sweeping U.S. tariffs, while markets brace for key jobs data that could sway the Fed’s next move.

Tariff Shock Sends Ripples Through Asian Markets

Global markets stumbled on Friday after the United States unveiled a sweeping wave of new tariffs on dozens of key trade partners, adding fresh uncertainty to the global economic outlook. Investors, already on edge over inflation and monetary policy, are now anxiously awaiting U.S. jobs data that could influence the Federal Reserve’s next interest rate decision.

Washington Turns Up the Heat With New Tariff Regime

In a late-Thursday move that stunned trading desks across the globe, President Donald Trump signed an executive order imposing steep tariffs ranging from 10% to 41% on a wide array of imports from foreign allies and partners. The breakdown includes:
  • 25% on Indian exports entering the U.S.
  • 20% on Taiwanese goods
  • 19% on Thailand’s shipments
  • 15% on products from South Korea
Additionally, Canada was hit with a 35% tariff, up from 25%, for all products not covered under the U.S.-Mexico-Canada Agreement (USMCA). However, Mexico was granted a 90-day exemption to allow time for trade negotiations.
Taiwanese President Lai Ching-te attempted to ease fears, calling the tariffs “temporary” and suggesting a rollback could follow successful trade talks.

Markets React: Asia Sinks, Wall Street Stumbles

The impact was quickly felt across the Asian trading floors:
  • MSCI’s Asia-Pacific Index (excluding Japan) dipped 0.7%, capping a 1.8% decline for the week
  • South Korea’s KOSPI fell 3%
  • Taiwan’s benchmark index dropped 0.9%
  • Japan’s Nikkei slid 0.4%
  • Hong Kong’s Hang Seng managed a modest 0.2% gain, while Chinese blue chips held steady
European markets looked wobbly too, with EUROSTOXX 50 futures down 0.2%. Meanwhile, U.S. futures also took a hit. Both Nasdaq and S&P 500 futures edged 0.2% lower after Amazon posted earnings that fell short of market hopes, sending its shares down 6.6% in after-hours trading.
On the flip side, Apple delivered strong June-quarter results, buoyed by early iPhone purchases from customers trying to sidestep looming tariff hikes. The company projected revenue above Wall Street forecasts, boosting its shares by 2.4% in after-hours trade.

Analyst Insight: Why the Market Isn’t Panicking Yet

Tony Sycamore, a strategist at IG, noted that the muted market reaction might reflect optimism that these new trade barriers aren’t set in stone.
“Markets appear to be banking on renegotiations,” Sycamore said. “Recent trade agreements with the EU, Japan, and South Korea have softened the blow, and there’s a belief these tariff levels could be dialed down over time.”
This suggests investors may see Trump’s aggressive trade stance more as a negotiating tactic than a permanent pivot.

Jobs Data Looms as Fed Rate Cut Hangs in Balance

All eyes now turn to the highly anticipated U.S. jobs report, set for release later Friday. Economists forecast a modest gain of 110,000 jobs in July, with the unemployment rate expected to tick up to 4.2% from 4.1%.
This data could prove pivotal. Earlier in the week, the Federal Reserve held interest rates steady, and futures markets quickly adjusted. According to the CME’s FedWatch tool, the probability of a rate cut in September has slipped to 39%, down sharply from 65% prior to the Fed’s decision.
Adding to the complexity, new figures showed inflation picked up in June, with the latest tariffs pushing prices higher and rekindling concerns about persistent inflationary pressures. At the same time, weekly jobless claims remain low, signaling a still-resilient labor market.

Dollar Gains, Yen Drops Amid Fed Uncertainty

The U.S. dollar strengthened, with the Dollar Index climbing 2.5% this week to 100.1, its highest since June. That marks the currency’s strongest weekly gain since late 2022.

Currency moves included:

  • Canadian dollar held steady, despite its 1% weekly drop
  • Japanese yen slumped, with the greenback rising 0.8% to 150.7 yen, a four-month high
  • The Bank of Japan, while holding rates steady, delivered a slightly more dovish tone than markets had anticipated

Bond and Commodity Markets Hold Ground

Bond yields were largely unchanged. The 10-year U.S. Treasury yield nudged up 1 basis point to 4.374%, following a 2 basis point dip overnight.

In commodities:

  • U.S. crude rose 0.1% to $69.36 per barrel
  • Brent crude edged up 0.2% to $71.84
  • Spot gold hovered at $3,286 per ounce, with minimal movement

Outlook: Market Jitters May Grow Without Clarity

The sudden tariff escalation injects fresh volatility into already fragile global markets, and the next big cue will come from Friday’s U.S. jobs data. A stronger-than-expected print could crush hopes for near-term Fed easing, pressuring stocks further. On the flip side, a weaker report could give policymakers room to pivot.
Meanwhile, investors are watching closely to see whether U.S. trade officials signal any willingness to soften tariffs or fast-track negotiations.

Source:  (Reuters)

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