Tariff Shock: Markets Reel from Trump’s 104% China Move

Trade volatility impacts bond yields

Catch up quick:

Markets were rattled Tuesday after President Trump unveiled a 104% tariff on Chinese imports, while offering a 90-day pause on reciprocal tariffs for other trading partners. The move jolted investors and triggered sharp moves in bonds, currencies, and equities.

Why it matters:

The policy whiplash has injected a wave of uncertainty into markets already on edge. Bond yields surged, the dollar slipped, and traders are bracing for potential retaliation from China.

By the numbers:

• 10-year Treasury yields jumped above 4.5% before settling at 4.38%, the highest level since Trump took office this year.

• The U.S. dollar index fell 0.6%, defying the usual tariff-fueled rally.

• China’s yuan hit its lowest level since 2007.

What’s happening:

• Investors dumped U.S. Treasuries amid fears China could retaliate by selling off part of its $759B U.S. bond holdings.

• The tariff pause for non-China partners triggered a 6% rally in equities, suggesting traders are betting on a negotiated outcome.

• Market sentiment is split: is this a clever leverage play, or a destabilizing gamble?

The big picture:

Trump’s team, led by Treasury Secretary Scott Bessent, appears to be using tariff brinkmanship as a tool to extract global trade concessions. But the risk is clear: escalating tensions with China could undermine global confidence in U.S. assets.

What they’re saying:

• Traders online are already speculating about a “bond dump” scenario if China strikes back.

The bottom line:

This is no ordinary trade spat. With bond yields surging and the dollar weakening, markets are signaling deep unease. The tariff drama is far from over—and the next chapter could be even messier.