The White House Watch newsletter offers a free guide to the implications of the 2024 US election for Washington and the world.
The US dollar, Treasury securities, and equities experienced a downturn as banks and investors expressed concerns that Donald Trump’s tariffs could potentially push the US into a recession, despite the president pulling back from an extensive trade war. The dollar fell to its lowest level in over 20 months against currencies of major trading partners as a move away from US assets caused the yen, euro, and pound sterling to surge.
The yield on the 10-year US Treasury rose to 4.46 percent on Friday, up from 4.17 percent at the start of April, just before Trump’s “liberation day.” Gold prices soared to a record high as investors sought safety in haven assets.
On Thursday, the S&P 500 dropped 3.5 percent, reversing the previous session’s 9.5 percent gain. Wall Street’s primary stock index has decreased by 6.1 percent in April, while the technology-focused Nasdaq Composite fell by 4.3 percent after experiencing its best day since 2001. Stock prices in Tokyo also declined on Friday.
Markets had rebounded on Wednesday when Trump temporarily halted steep “reciprocal” tariffs on a range of countries for 90 days. This reprieve followed significant selling in US markets, which also affected the $29 trillion Treasury market, a core element of the financial system.
Despite this pause, Wall Street banks and investors warned that Trump’s decision to raise tariffs on Chinese imports up to 145 percent and maintain a 10 percent universal tariff still posed serious risks to the US and global economies. Barclays’ Mitul Kotecha noted that the “US exceptionalism has been tarnished,” adding that much of the sell-off was occurring during Asian trading hours, prompting concerns that foreign investors, particularly those in China, might begin selling US Treasuries.
The 30-year yield increased by 0.03 percentage points to 4.9 percent on Friday following a rise of 0.13 percentage points on Thursday. Goldman Sachs cautioned that it was premature to declare an “all clear,” highlighting that despite some immediate risks being reduced, high policy uncertainty could impact consumer and business activities.
Markets continued to face pressure as Trump held a televised cabinet meeting, where Treasury Secretary Scott Bessent addressed a reporter’s question about the market decline by stating that he did not notice anything unusual. Trump himself claimed not to have seen the markets on the previous day and remarked on China’s trade practices, saying that a deal would be welcome if possible. He indicated a readiness to reinstate broad reciprocal tariffs should other countries refuse to negotiate new trade agreements with Washington.
China imposed an additional 84 percent of tit-for-tat tariffs against the US on Thursday, raising its total tariff on American imports to over 100 percent. President Xi Jinping showed no inclination toward backing down from the trade confrontation, though Beijing did not immediately match Trump’s highest tariff rate.
The Chinese commerce ministry stated, “If you want to talk, the door is open, but the dialogue must be conducted on an equal footing and with mutual respect.” The ministry also warned that pressure and threats were ineffective approaches with China. The renminbi weakened to its lowest level since 2007, indicating that Beijing might tolerate a gradual depreciation in response to US tariffs.
Fear of an expanding trade war between the two largest economies also contributed to lower oil prices. Brent crude settled down by 3.3 percent at $63.33 a barrel, while West Texas Intermediate fell just below $60 a barrel, posing potential risks to the US shale sector.
The trade conflict with China, the world’s largest exporter, has raised the average US tariff on imports from the Asian nation to 134.7 percent, according to the Peterson Institute for International Economics. A separate analysis by the Yale Budget Lab found that American consumers are now facing a tariff rate of 27 percent, the highest since 1903, when accounting for both US tariffs and those imposed against the US.
Bill Campbell of DoubleLine suggested that uncertainty surrounding Trump’s trade policies was likely to impact markets and macroeconomic forecasts in the coming months and quarters.
This report was compiled by Kate Duguid, Will Schmitt, Harriet Clarfelt, and George Steer in New York; Steff Chávez and Aime Williams in Washington; and William Sandlund and Arjun Neil Alim in Hong Kong.
