Trump Confirms Reciprocal Tariffs Against All Countries, Shaking Global Markets

Sweeping Tariff Plan to Be Unveiled on 'Liberation Day'

U.S. President Donald Trump announced on Sunday (30) that his long-anticipated reciprocal tariff plan, set to be revealed on Wednesday (2), will apply to all countries, rather than a select group with significant trade imbalances, as previously speculated by markets.

“You start with all countries. Essentially, all the countries we’re talking about,” Trump told reporters aboard Air Force One, according to Reuters.

The broad scope of the plan has heightened concerns of an impending global trade war, as it mandates tariffs proportional to those imposed by other countries on U.S. products. Trump argues that this approach protects the American economy from unfair competition.

Markets React: Stocks Drop, Treasuries Surge

Financial markets reacted sharply to Trump’s announcement. In early morning trading:

• Dow Jones Futures fell 0.45%

• S&P 500 Futures dropped 0.76%

• Nasdaq Futures plunged 1.20%

Investors flocked to U.S. Treasuries, driving yields down as recession fears mounted:

• 2-year Treasury yield fell six basis points to 3.85%, near a six-month low.

• 10-year Treasury yield dropped to 4.20%.

“With recession risk rising in the U.S., the short- and medium-term segments of the yield curve are the safest havens,” said Jamie Niven, portfolio manager at Candriam, in an interview with Bloomberg.

Safe-Haven Assets Surge: Yen and Gold Hit New Highs

• Japanese yen gained 0.35%, trading at 149.29 per dollar.

• Gold surged to an all-time high of $3,128.06, marking its third consecutive record-breaking session.

• U.S. dollar index rose 0.07%, reaching 104.08.

The uncertainty surrounding the U.S. tariff policy is fueling concerns over inflation and economic stagnation, pushing investors toward defensive assets.

Europe Braces for Impact as EU Prepares Response

The announcement has rattled European leaders. European Central Bank (ECB) President Christine Lagarde emphasized on Monday that the EU must take greater control of its economic future, given the risk of trade retaliation affecting growth.

Meanwhile, Trump hinted at exemptions for certain countries, saying on Friday that he is open to negotiating trade agreements. However, The Washington Post reported over the weekend that Trump is urging his advisors to take a more aggressive stance.

Growing Fears of U.S. Stagflation and Recession

Economists are increasingly worried about stagflation—a combination of stagnating economic growth and persistently high inflation.

• Consumer confidence index, measured by the University of Michigan, fell to a two-year low.

• Long-term U.S. inflation expectations rose to 4.1%, the highest in 32 years.

• Goldman Sachs nearly doubled its recession probability forecast for the U.S. within the next 12 months, now estimating a 35% chance of an economic downturn.

“The risk of a global trade war has significantly increased the likelihood of a U.S. recession,” Goldman Sachs stated in a research note. The investment bank also expects the Federal Reserve to implement three interest rate cuts by December.

Fed’s Caution: Trade War Could Worsen Inflationary Pressures

Thomas Barkin, President of the Federal Reserve Bank of Richmond, warned that the economic uncertainty surrounding tariffs is clouding the Fed’s outlook.

“There is a thick fog over the U.S. economy right now,” Barkin said, stressing that the effects of these tariffs could be far more severe than in 2018, given the current elevated inflation levels.

With the 'Liberation Day' tariff rollout set for April 2, markets are bracing for further volatility as the global economic landscape shifts dramatically.