On Tuesday, global stock markets took a hit as worries about the economy grew. This came after President Trump’s new tariffs on Canada, Mexico, and China went into effect. The S&P 500 dropped by more than 1.8%, following a similar decline the day before. This marked the sharpest loss the index has seen this year. Meanwhile, the Nasdaq Composite index fell over 1%, which put it into a correction phase—defined as a 10% or more drop from a recent high, which was reached in December.
As stocks fell, investors sought safety in government bonds. This move pushed the yield on the 10-year Treasury note down to its lowest level since October. A drop in yield usually suggests that investors are worried about the economy’s ability to handle the new tariffs in the long term. This concern was also reflected in a notable shift in expectations regarding how often the Federal Reserve might lower interest rates.
Investors are now predicting that the Fed will cut interest rates up to three times this year. Earlier, they expected just one cut. This change shows growing fears that the central bank might have to act quickly to support the economy, which some believe could slow significantly due to these tariffs.
In the short term, tariffs could drive up inflation, causing the Fed to keep rates high. However, if economic growth slows down, the Fed may find it necessary to cut rates fast to help the economy recover.
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International Trade and World Market,Protectionism (Trade),United States International Relations,Stocks and Bonds,Standard & Poor’s 500-Stock Index,Customs (Tariff),Euro (Currency),Rheinmetall AG,Volkswagen AG
