Perhaps the clearest demonstration came this week, as the global financial markets took a tremendous stock. Increasing U.S. Treasury yields and intensifying tariff conflicts between the U.S. and China were the catalysts for the slide. Investors took flight in response, causing a dump of government bonds, and triggering a dramatic drop in overnight stock futures in all three major indexes.
Over the past few days, U.S. Treasury yields spiked as investors rushed to sell and get out of bonds. The benchmark 10-year yield has now risen above 4.3%, a watershed moment after spending the summer well below 4%. This change in bond market dynamics has played a major role in the current increased volatility, leading many investors to reassess their approach.
In particular, on the morning of Wednesday March 11, the Dow futures were down 750 points, or a 2% fall. At the same time, S&P 500 futures were down 2.2% and Nasdaq futures declined by 2.5%. Selling pressure remained in a wild Tuesday. It was a day that morning had shown some hopeful early signs of a rally after four days of steep declines.
Amidst these market fluctuations, White House Press Secretary Karoline Leavitt announced that China missed its deadline to reduce a 34% retaliatory tariff on U.S. goods, which was initially imposed on Friday. This statement came shortly after the Trump administration nearly doubled its additional tariff on China, further intensifying the trade tensions.
The consequences of these tariff increases reached far beyond U.S. borders. South Korea’s benchmark Kospi index slid into bear market territory, with a 20% drop from its previous high. South Korea has been doing its part to help with the rapidly worsening situation. The province responded with $1.3 billion in emergency support measures to shore up their auto industry against the fallout from the tariffs.
Asian markets reflected similar downward trends. Japan’s Nikkei index plunged by 4%, while Hong Kong’s Hang Seng index tumbled by 1.5%. Taiwan markets plunged deeply, further adding to the sense of chaos and uncertainty seen across the region.
In the market for commodities, gold prices climbed over 1%, approaching a record high during the chaos. U.S. crude oil prices crashed, closing more than 4% down on the day. These currently hover just under $57 a barrel, their lowest level since mid-February of 2021. The benchmark, Brent crude price has fallen to approximately $60 a barrel. This dramatic decline is a perfect example of the market uncertainty caused by tariff hazards.
As investors come to terms with these surprising announcements, the bond market is still being pressured from the other end by historic volatility. Many are looking for safer investments as concerns continue to grow about the trade policies and their economic ramifications.