World stocks, the dollar and oil all tumbled on Thursday as Donald Trump’s drastic new U.S. trade tariffs drove widespread fears of a global recession and left investors seeking safe-haven bonds and the yen.

A new baseline 10% tariff on imported goods plus some eye-watering additional ‘reciprocal’ tariffs on dozens of countries Trump said had unfair trade barriers, left traders clearly rattled by their severity.

In Europe, where the 27-country EU bloc now faces a 20% reciprocal levy, bourses lurched between 1.3% and 2% lower as Brussels and other capitals voiced uproar.

Wall Street futures were down 3% ahead of what was expected to be a turbulent U.S. restart later. The dollar’s 2% plunge had it heading for its worst daily drubbing since November 2022. /FRX

In Asia, where some of the harshest tariffs had been focused, Tokyo had dropped 2.7% to leave it facing its worst week in nearly two years.

Analysts at JPMorgan said the tariffs were “significantly higher than the realistic worst-case scenario” that had been envisaged.

Credit rating agency Fitch warned they were a “game-changer” for both the U.S. and global economy, while Deutsche Bank called them a “once in a lifetime” moment that could easily knock between 1%-1.5% off U.S. growth this year.

“Many countries will likely end up in a recession,” Fitch’s Olu Sonola said. “You can throw most forecasts out the door if this tariff rate stays on for an extended period of time.”

The scramble for ultra-safe government bonds that provide a guaranteed income drove U.S. Treasury yields down towards 4% and Germany’s 10-year yield , the European benchmark borrowing rate, went 8.5 basis points lower to 2.64%.

The sweeping new tariffs will raise effective import taxes in the world’s largest economy to the highest levels in a century. If they do trigger recessions, central banks around the world are likely to slash interest rates which benefits bonds.

US dollar slides further

The Swiss franc , another traditional safety play touched its strongest level in four months as the euro surged 2% to $1.10.

“Eye-watering tariffs on a country-by-country basis scream ‘negotiation tactic’, which will keep markets on edge for the foreseeable future,” said Adam Hetts, global head of multi-asset and portfolio manager at Janus Henderson Investors.

China, held its currency relatively steady, containing the yuan’s drop to about 0.4% despite total tariffs of above 50% on Chinese exports and the hit to Vietnam seen as shutting down a popular work-around route.

China’s big domestic economy and the hope of support from Beijing limited losses in Hong Kong stocks to about 1.5% and in Shanghai to around 0.5%.

“The key focus over the next few days should clearly be China,” said Deutsche Bank strategist George Saravelos.

“How willing will China be to wait for trade negotiations or to absorb this?,” he said. “Or will it try to ‘export’ the shock … via a devaluation of the yuan.”