New Tariff Threats Spark Market Turmoil, Gold & Yen Gain Ground
Early this morning, renewed trade tensions erupted between the United States and the European Union, sending shockwaves through financial markets. President Trump has recommended imposing aggressive new tariffs of 50% on European Union imports—more than double the 20% reciprocal tariff rate currently suspended. With the tariffs set to take effect on June 1, only nine days away, and an upcoming Memorial Day holiday shortening the window for negotiations, investors have reacted sharply. U.S. stock markets plunged on the news, while assets like gold and government bonds surged as traders scrambled for safe havens.
Trump expressed frustration at the negotiating stalemate with the EU, saying discussions were going nowhere, and characterizing the EU as difficult to work with. Adding fuel to the fire, the President also warned that he might introduce 25% tariffs on Apple if the tech giant fails to move iPhone production to the U.S. Analysts warn that such a move would substantially raise costs, given Apple’s entrenched global manufacturing and supply chain structures.
USD-JPY
The dollar fell sharply against the yen following Trump’s announcement.
The impact on investor sentiment from Trump’s tariff rhetoric has been stark and immediate. Major U.S. stock indices declined significantly in intraday trading, falling between 1.5% and 2%, reflecting increased fear among investors regarding potential disruptions to trade and corporate earnings. Meanwhile, traditional safe-haven assets saw pronounced inflows. Bonds rallied as investors sought shelter, pushing yields downward, and the U.S. dollar weakened broadly against major currencies amid concern over escalating global trade friction.
With the dollar losing ground, investors have turned increasingly toward safe-haven currencies, particularly the Japanese yen. The yen has rallied notably, underscoring its traditional role as a refuge during economic turbulence and uncertainty. Forex traders noted a meaningful break below the previous bullish trendline in the USD/JPY pair, currently testing critical support around the 142.50 level. Currency analysts now warn that losing key supports at 142.50 and subsequently 142.00 could swiftly push USD/JPY toward the psychologically important 140.00 mark. Conversely, a recovery above the current downtrend line and the 50-period exponential moving average could indicate some temporary reprieve in dollar selling pressure.
Gold has emerged as today’s biggest winner, surging by more than $60 per ounce as the trade tensions stoke demand for alternative safe haven assets. The yellow metal’s strong performance highlights investor skepticism not just about short-term political developments, but also about broader economic stability and the future of the dollar.
