Tariff 2.0 Sparks Market Risk-Off Sentiment: Equities and Bonds Fall, Commodities Rally

Market Overview

Former President Trumps push for “Reciprocal Tariff 2.0” reignited fears of a renewed trade war, sending all three major U.S. stock indices lower for the week. Risk-off sentiment surged across markets. Despite the overall downturn, the “Magnificent Seven” tech stocks remained relatively resilient, cushioning some of the losses. European markets also fell sharply, with the pan-European STOXX index tumbling over 1% on Friday. Inflation concerns resurfaced, leading to a broad selloff in U.S. Treasuries, with the 10-year yield jumping nearly 6 basis points. The U.S. Dollar Index rebounded to the 97 level, up 1% for the week, snapping out of its three-year low. Commodities outperformed: gold rose for a third straight session, climbing over 1.3% intraday; silver surged nearly 3.6% to hit a 14-year high; oil gained 2.7% on speculation Trump may sanction Russian oil exports.

Hot Topics to Watch

● Trump Announces 30% Tariffs on Mexico and the EU, Effective August 1

On his Truth Social platform, Donald Trump published formal letters to Mexico and the European Union, declaring that beginning August 1, 2025, the U.S. will impose a 30% tariff on imports from both regions. He stated that the tariffs may be reconsidered if Mexico achieves meaningful progress in curbing drug cartels and fentanyl trafficking, or if the EU agrees to fully open its market to U.S. goods by removing tariffs, non-tariff barriers, and other trade restrictions.

● Powell Considering Resignation？

Senior U.S. officials revealed that Fed Chair Jerome Powell may be considering stepping down due to controversy surrounding the Fed headquarters renovation. The project‘s cost ballooned from $1.9 billion to $2.5 billion, drawing criticism for its “Versailles-like” extravagance. Powell is accused of misleading Congress during testimony about the project’s details, prompting the White House Budget Office to demand an explanation for the overrun. Markets are now wary of potential instability in Fed leadership, with some analysts suggesting a successor may favor more dovish monetary policies.

Key Event to Watch

🕙 10:00 GMT+8 – China June Trade Balance (USD)