Global stocks smashed by tariffs; USD falls, EUR and GBP outperform - United States

Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist

Tariff news sends shockwaves through FX

Global equity markets were heavily sold over the last 24 hours, with US markets leading the losses, as investors reacted to yesterday’s announcement on new US tariffs.

The Dow Jones fell 4.0%, S&P 500 lost 4.8% while the tech-focused Nasdaq fell 6.0%.

In Europe, the UK’s FTSE 100 fell 1.6% while Germany’s DAX dropped 3.0%. Japan’s Nikkei lost 2.8%.

In FX markets, the moves were sharp, volatile and divergent.

The US dollar collapsed, with the USD index falling 1.6%.

The European currencies outperformed with the EUR/USD up 1.8% and GBP/USD up 0.7%.

APAC currencies were initially lower before rebounding. The AUD/USD traded in a 150-point range before ending up 0.5%. The NZD/USD touched a four-month high before finishing 0.8% higher.

Looking forward, while the tariff news will dominate, markets will also be looking to the US jobs report, due at 11.30am AEDT. Markets are looking for 135k new jobs to be added with the unemployment rate forecast to remain steady at 4.1%.

Chinese yuan hit by reciprocal tariffs

In detail, all exporters to the US, with the exception of Canada and Mexico, are subject to universal reciprocal tariffs of at least 10%, as mandated by President Donald Trump. Canada and Mexico remain in negotiation after tariffs were first imposed in February.

South Korea will pay 25%, Japan 24%, the EU 20%, and China 34%. The total US tariff rate on imports from China will increase to 54%.

Trump added that nations who want to have the reciprocal tariffs lifted must lower their duties on the US, so further talks are probably in order.

Indirectly, US Treasury Secretary Scott Bessent hinted that this is the maximum for the time being (“maximalist negotiating position”) and might decrease when trade partners grant some of America’s requests.

The USDCNH pair spiked from 7.2800 to slightly under 7.3500 before reversing to end the day lower.

The Chinese yuan saw losses in other markets, with SGD/CNH hitting the highest levels since October and AUD/CNH at the highest level since December before later easing.

Euro stands out

Ursula von der Leyen, the head of the European Commission, said the EU is sorry that the United States has decided to impose further tariffs, which would increase inflation, and threatened to take action if negotiations were unsuccessful.

Tariffs won’t solve the issue, she added, even if some nations do violate the law, as President Donald Trump maintains. Von der Leyen hoped that there was still time for US trade talks.

Prior to the announcement on Wednesday, EUR/USD was already above 1.0860 and has been rising as yield spreads tighten and pressure mounts on US rates.

The euro surged in other markets. The AUD/EUR and NZD/EUR both hit new five-year lows while EUR/USD jumped to 21-month highs.