Tariff Shock Rattles Global Assets, Risk Sentiment Surges

Market Overview

Former President Trumps latest tariff proposal triggered sharp volatility across financial markets. U.S. equities came under pressure, with the S&P 500 and Nasdaq both closing down nearly 1%, reflecting a pullback in investor risk appetite. The 10-year Treasury yield surged by approximately 7 basis points, signaling heightened inflation and interest rate expectations. The U.S. dollar strengthened significantly, rising 0.6% to hit a two-week high, as investors sought safe-haven assets. Emerging market currencies suffered their steepest one-day decline since April, under mounting outflow pressure. Spot gold initially plunged over 1% but quickly rebounded, ending the session flat in a classic V-shaped move—indicating resilient demand for safety. In energy markets, WTI crude oil bounced more than 4% from its intraday lows, underscoring market sensitivity to supply disruptions and geopolitical tensions. Overall, the resurgence of tariff uncertainty is intensifying market turbulence and asset price swings.

What to Watch

🔹 U.S. to Impose 25% Tariffs on Japanese and South Korean Products Starting August 1

Trump announced that the new tariffs will be applied independently of existing sector-based levies. Products rerouted through third countries will face even higher duties. Companies manufacturing or assembling in the U.S. will be exempt. If Japan or South Korea raises retaliatory tariffs, the U.S. will impose reciprocal increases on top of the initial 25%. A White House official clarified that tariffs on specific countries will not be stacked. U.S. equities extended losses, while the Japanese yen and South Korean won dropped over 1% intraday.

🔹 Japans Ultra-Long Bond Yields Spike

Morgan Stanley flagged two key short-term risk events in Japan. First, the July 9 tariff negotiation deadline—failure to reach a U.S.-Japan agreement could spark a risk-off shift, strengthening the yen. Second, the July 20 Upper House elections—should Japans ruling party falter, markets may anticipate more aggressive fiscal stimulus, potentially driving yields on ultra-long Japanese government bonds higher.

Key Events to Watch(GMT+8)

• 18:00 US – June NFIB Small Business Optimism Index

• 23:00 US – June New York Fed 1-Year Inflation Expectations

• 00:00 US (Overnight) – EIA Monthly Short-Term Energy Outlook