Investors are expected to flee to safe-haven assets such as bonds and gold in the wake of high market volatility after US President Donald Trump, in his speech before Congress, doubled down on tariffs against Canada, China and Mexico, which all announced retaliatory measures.

The US tariffs took effect on Tuesday ( March 4 ), sending global markets including the major US stock indices tumbling.

The Trump-induced rally in the US dollar index that took place in early February, has also reversed with the ICE US Dollar Index ( DXY ) falling by 1.55% as of early Wednesday evening ( Hong Kong time ), its lowest point since November 2024, reflecting investor concerns over trade tensions and their impact on the US economy.

After his speech, the major US indices saw substantial declines with the S&P 500 falling by 1.2%, the Dow Jones Industrial Average down 1.6%, and the Nasdaq Composite sliding by 0.4%.

However, Asian shares and US futures ended mostly higher on Wednesday with Hong Kong’s Hang Seng index rising 2.6% to 23,548.86, the Shanghai Composite index up 0.6% at 3,342.36, Tokyo’s Nikkei 225 index inching up 0.2% to 37,418.24, South Korea’s Kospi rising 1.2% to 2,558.13, and Australia’s S&P/ASX 200 dropping by 1.2% to 8,141.10.

Negative guidance

While some investors believe the tariffs could eventually benefit US manufacturing and improve the trade balance, the immediate market reactions suggest investors are wary of the economic repercussions in the medium to long term.

Guidance from US companies is now more negative than positive following a strong earnings season – 75% of the companies beat earnings expectations with the S&P500 earnings up by around 18%, the highest growth rate since Q4 2021 – says Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

“Target and Best Buy joined in yesterday’s warnings that the US consumers will have to face higher prices because of Trump’s tariffs. But since we’re emerging from a period of relatively high inflation, companies have less room to pass price increases on to customers and the latter is weighing on earnings outlook. In summary, tariffs are just as toxic for American companies as they are for others. America won’t be great by destroying value globally,” Ozkardeskaya says.

Taxes on Americans

Nigel Green, chief executive officer of deVere Group, notes: “Tariffs are not a win for American workers or businesses, they’re taxes. Companies across industries, from manufacturing to tech, are expected to bear the brunt of these costs, leading to price hikes, squeezed margins, and reduced competitiveness. Trump’s assertion that these measures will strengthen the US economy is, at best, disingenuous. The reality is that higher costs on imported goods will ripple through supply chains, forcing firms to either absorb the added expense or pass it on to consumers. Either way, the result is likely economic pain.”

 In fixed income, the yield on 10-year US treasuries dropped to a five-month low of 4.2%, an indication that investors are seeking the relative safety of government bonds in the wake of concerns over the possible adverse impact of the trade war between the US and its major trading partners, particularly higher inflation and higher interest rates.

Spot gold price declined by 0.1% to US$2,892.00 per ounce, while US gold futures remained steady at US$2,902.20. Although the slight decline following Trump's congressional address suggests that investors were not immediately seeking gold as a safe-haven asset, it does indicate that investors are more cautious about the broader economic prospects.