Trump's tariff threat triggers market turmoil, U.S. stocks and bonds fall together, gold becomes the biggest winner

U.S. President Trump has once again threatened high tariffs, causing market sentiment to tense.

According to the Zhitong Finance APP, on Friday, the U.S. stock and bond markets experienced a simultaneous sell-off as investors rushed to seek safety. Trump is attempting to exert unexpected tariff pressure on multiple trading partners to force countries to reach a trade agreement with the U.S. before the August 1 deadline, a strategy that has raised market concerns about trade conditions and future inflation.

According to the latest disclosed trade letters, Canada will face a 35% tariff on export products not covered by the United States-Mexico-Canada Agreement (USMCA); Japan and Brazil will face tariffs of 25% and 50%, respectively. Previously, the market widely expected Trump to impose a uniform "general tariff" of 10%, but he hinted in a news interview that this rate could be raised to 15% or 20%, further disrupting market expectations.

"Other countries will think, 'How do you negotiate with someone who can change the rules at any time?'" said Anthony Saglimbene, Chief Market Strategist at Ameriprise Financial, in an interview. He believes that Trump's actions may reflect that trade negotiations are not going as smoothly as he expected and may also be an attempt to apply "maximum pressure" before the tariffs take effect.

As a result, European stock markets fell first. The ETF for Germany's DAX index, Global X DAX Germany Fund, fell 1.9% over two days, marking the largest decline since April 8, although it is still up more than 35% for the year. As of Friday's close, the S&P 500 index fell 0.33%, the Nasdaq fell 0.22%, and the Dow Jones Industrial Average fell 0.63%.

"Currently, investors are reluctant to sell aggressively because they remember what happened last time," noted Keith Lerner, Co-Chief Investment Officer at Truist Advisory Services, pointing out that the stock market had quickly rebounded after Trump suspended "reciprocal tariffs" in April. However, he also admitted that investors are now fatigued by the constantly changing trade news.

The market remains vigilant about the potential implementation of new tariffs, but there are also divergent trends. Large tech stocks performed relatively well, with chipmaker Nvidia (NVDA.US) rising 0.5%, once again becoming a preferred safe haven for investors. In contrast, small-cap stocks, which had previously led the gains, turned downward, with the Russell 2000 index plummeting 1.3%.

The U.S. bond market is also under pressure. Typically, long-term government bonds rise due to safe-haven demand when market sentiment deteriorates, but this year, gold has taken on more of that safe-haven role. On Friday, spot gold rose 0.94% to $3,355.7. The yield on 30-year U.S. Treasuries briefly rose to 4.957%, approaching the key psychological level of 5%, the highest level since May. Long-term bonds fell significantly more than short-term bonds, forming a "bear steepening" curve, which the market interprets as a sign that concerns about rising future inflation are beginning to emerge.

BMO Capital Markets strategists Ian Lyngen and Vail Hartman wrote in a report on Friday: "The main feature of the past three months has been the introduction of a series of new uncertainties. The current consensus in the market is to continue to wait and see how these policies ultimately transmit to the real economy ”