Market turmoil extended into Wednesday, as stocks across Europe and Asia dropped as significantly higher import taxes on goods entering the United States went into effect.
The tumult also hit government bond markets, sending yields higher, as investors moved away from traditional haven assets during times of economic turmoil. The yield on 10-year U.S. Treasuries jumped to 4.38 percent, as bonds sharply sold off for another day.
President Trump uprooted markets last week with the announcement of tariffs on countries across the world. On Wednesday, significantly higher “reciprocal” import taxes went into effect for goods arriving from many major trading partners, with taxes on imports from China exceeding 100 percent.
Stocks in Asia slumped on Wednesday, following a day on Wall Street when markets whipsawed. Taiwan was the worst hit, sinking more than 5 percent. Benchmark indexes were down more than 3 percent in Japan and almost 2 percent in South Korea. Stocks listed in Hong Kong were roughly flat, while those listed in Shanghai gained slightly.
The Stoxx Europe 600 dropped 2.6 percent in early trading. The FTSE 100 in London fell more than 2 percent along with the benchmark indexes in Frankfurt, Paris and other European financial capitals.
In the United States, the S&P 500 ended trading on Tuesday near a bear market, which is a 20 percent drop from a recent peak — a symbolic, and relatively rare and worrisome, threshold for investors. It closed 18.9 percent below its mid-February record, having plunged more than 12 percent just in the days since Mr. Trump announced his new tariffs.
S&P 500 futures, which let investors bet on the direction of the index when it resumes trading in New York, fluctuated between losses and gains, continuing the choppy pattern of recent days.
Analysts at Rabobank, a financial firm in the Netherlands, noted that markets were in a “strange situation”: Treasury yields are climbing while bets were increasing on how many times the Federal Reserve would cut interest rates. They cited several possible reasons for the volatility in the bond market including the wariness of investors to hold long-dated bonds when uncertainty is so high, or traders liquidating bond holdings to meet margin calls, when banks demand extra collateral to cover potential losses on assets bought with borrowed money. The yield on 30-year Treasury bonds jumped from 4.4 percent on Friday to 4.8 percent on Wednesday.
Analysts at Goldman Sachs said in a note late on Tuesday that recent sharp moves in Treasuries and other markets “suggest a higher risk that market function may be deteriorating there.”
Economies in Asia were hit hardest by Mr. Trump’s tariff increases, according to analysts at BMI, a unit of the research firm Fitch Solutions. While they are waiting “a few days” to see whether countries can negotiate tariffs down, when it comes to forecasts of growth, there are likely “large downward revisions in order,” they said.
Administration officials appeared to leave the door open for negotiations that could ultimately defuse the trade war, citing the fact that dozens of countries had approached the U.S. government in recent days to strike deals.
But White House officials have sought to set a high bar for what the president is willing to accept, marking a shift in tone after Mr. Trump and his aides initially signaled they would not haggle over tariffs at all.
“If they come to us with really great deals that advantage American manufacturing and American farmers, I’m sure he’ll listen,” Kevin Hassett, the director of the White House National Economic Council, said in an interview on Fox News.
But, he added, “after decades and decades of mistreating American workers, it’s going to be tough to get him to decide to really come to the table and sign on the dotted line.”
Earlier this week, Japan emerged as the first major economy to secure priority tariff negotiations with the Trump administration. The news triggered a brief surge in Tokyo-listed stocks before they resumed their decline on Wednesday.
Since Mr. Trump’s announcement last week of new tariffs, including a base tax of 10 percent on virtually all American imports, other countries have responded with tariffs of their own on U.S. goods, or with threats of retaliation.
China, the world’s second-largest economy, retaliated with 34 percent tariffs on American goods that are set to take effect at noon Eastern time on Wednesday.
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