Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said that after the US manufacturing data yesterday,

The Fed is still expected to deliver its next rate cut in June – and not before – but things could change rapidly depending on how much Trump policies will hit the US economy.

Today’s tariff announcement could give a fresh direction to global markets, but it would be naive to think that today will mark the end of the tariff shenanigans. More likely, it marks the start of another phase of uncertainty and turmoil. The real risk isn’t just the tariffs themselves but the constant threat of escalation, reversals, and retaliation.

She added:

Good news for investors is that an economic slowdown is not necessarily synonym of market selloff, as the Fed would step in by lowering rates and buying bonds to ensure financial stability. Inflation – on the other hand – is expected to be one-off and hopefully heal itself with economic slowdown.

The problem is that the supply-side shocks tend to be inflationary – as we saw during the pandemic times. And the tariffs could disrupt the global supply chains and bring inflation back before giving the Fed time to reach its 2% target.

For now, investors show an increased appetite for bonds – and that despite the expectation of a further rise in global debt levels. As such, the US 10-year paper is amassing haven flows – the 10-year yield fell to as low as 4.13% yesterday from around 4.80% peak reached by mid-January.

Similarly, the 10-year European government bond yields eased by almost 30bp since their mid-March peak. In equities, the European indices rebounded and the Stoxx 600 recovered by more than 1%. But the futures point at little appetite before the tariff announcement.

Eurozone bond yields are little changed ahead of the tariff announcement. Germany’s 10-year bond yield, the benchmark for the eurozone, was flat at 2.685%.