Market Reactions to Trump’s Tariff Wars

Abstract

The announcement of the tariff on 2 April will undoubtedly mark a historic milestone for international monetary systems. This date could ultimately alter the dollar’s established status as the world’s primary reserve currency. Trump’s announcement of tariffs triggered significant shocks in global markets, which unfolded in two distinct phases. The initial stage involved a wide range of panic-driven selling across both financial and non-financial asset classes. Market professionals often describe this behaviour as a “flight to safety” during periods of uncertainty. Initially, US Treasury yields tumbled as investors sought refuge from market volatility. In the first two days after the tariff announcement, the 10-year Treasury bond yield fell significantly. Yields decreased from 4.2% to 3.9% as equity investors swiftly shifted capital into traditionally safe-haven assets.