Reaction of Global Markets amid US tariff hike

European markets opened higher on Tuesday, rebounding after four straight losses as investors braced for U.S. President Donald Trump’s trade tariffs, set to take effect on Wednesday. The Stoxx 600 index climbed nearly 1%, driven by gains in healthcare and banking. Meanwhile, Asian markets edged higher, while U.S. stock futures dipped as traders awaited further clarity on Trump's tariff policies, including a 25% levy on foreign-made cars.

Wall Street has experienced heightened volatility, with the S&P 500 down 4.6% this year—its worst first-quarter performance since 2022. While the Dow surged 418 points on Monday, uncertainty surrounding Trump’s trade agenda has weighed on investor sentiment. Major banks, including Goldman Sachs and Barclays, have lowered their year-end targets for the S&P 500, citing economic risks linked to the sweeping tariffs.

Beyond equities, commodities have also reacted sharply. Oil prices surged after Trump threatened secondary tariffs on Russian oil if a resolution to the Russia-Ukraine conflict isn’t reached. WTI crude rose 3% to $71.46 per barrel, while Brent crude gained 2.7%. Gold, a traditional safe-haven asset, soared past $3,150 per ounce, reaching a new record high as investors sought protection against inflation and economic uncertainty.

The broader economic implications of Trump’s trade policies remain unclear. The U.S. dollar index has dropped nearly 4% this year, marking its worst start since 2016, while bond yields declined as investors turned to safer assets. In global markets, Japan’s Nikkei 225 and Taiwan’s benchmark index entered correction territory, and European indices recorded steep declines.

Analysts warn that Trump’s tariffs could fuel inflation, hinder economic growth, and increase unemployment. The administration argues that these measures aim to create fairer trade relationships, but the lack of clarity has unsettled investors. The uncertainty surrounding future tariff policies has contributed to growing recession fears, with Goldman Sachs raising its recession probability to 35% over the next 12 months.

As the deadline for new tariffs approaches, markets remain on edge. The evolving trade landscape continues to drive volatility, with businesses and consumers preparing for potential economic disruptions. The coming days will be crucial as traders assess the real impact of Trump's policies on global financial markets.