Global Markets Recoil as U.S. Tariff Surge Stokes Risk Aversion

Global financial markets experienced a sudden shift in sentiment after the U.S. announced steep tariffs—raising duties on Canadian imports to 35% and hinting at additional 15–20% levies on other allies. The announcement triggered a pullback in U.S. futures, with indices like the S&P 500 and Nasdaq sliding amid fears of escalating trade conflict. Safe-haven flows pushed the dollar higher, putting pressure on currencies tied to global trade and triggering defensive positioning across equity portfolios. While technology and AI assets weathered the initial storm, materials and financials came under notable weakness.

Despite the turbulence, investors have begun to apply the so-called “TACO trade” logic—assuming that political tariff threats are temporary and markets will rebound once rhetoric cools. This dynamic may temporarily reduce volatility and limit downside, but also creates a risk: if markets underreact, it could remove incentives for political restraint and invite more aggressive moves. Corporate earnings season next week could either steady the ship or amplify risk, depending on forward guidance tied to trade and inflation outlooks.