Treasuries Slide on Trump Tariff Threats as Gold Sets a New Record

Global financial markets pulled back as US Treasuries joined a broader selloff in bonds and equities, after President Donald Trump’s renewed tariff threats tied to Greenland stirred fresh trade worries. The shift in tone rattled investors who had recently been riding a rally powered by enthusiasm around artificial intelligence investments.

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US government bonds declined when trading resumed following Monday’s US holiday, as concerns grew that the Trump administration’s tougher posture toward key international partners could dampen appetite for American assets.

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Longer-dated Treasuries bore the brunt of the move, with the 30-year yield rising four basis points to about 4.88%. Meanwhile, the dollar weakened, sliding to its lowest level in roughly two weeks.

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Stock-index futures pointed to losses for US equities when Wall Street reopens, while European equity futures suggested further declines after the region logged its worst session since mid-November. Asian markets also moved lower, posting their sharpest drop in more than a week. As risk sentiment cooled, investors rotated toward traditional safe havens, pushing gold and silver prices to fresh record highs.

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Volatility picked up after Trump warned he could impose tariffs on eight countries opposing his efforts to gain control of Greenland, drawing resistance from European leaders.

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The flare-up in trade tensions has prompted investors to seek shelter in precious metals, especially as it coincides with unease over the Federal Reserve’s independence and other Trump policy proposals, including a plan to cap US credit-card interest rates.

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“Markets are clearly shifting into a risk-off mode following these tariff developments,” said Hebe Chen, an analyst at Vantage Markets, in an interview on Television. “The bigger takeaway is that tariff and trade risks are still very much in play and aren’t disappearing anytime soon.”

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The standoff between the US and Europe comes at a time when solid corporate earnings and sustained spending on artificial intelligence have helped support investor confidence. Even so, the market’s next move may hinge on how the European Union responds. EU officials are weighing possible tariffs on as much as €93 billion ($108 billion) worth of US products.

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French President Emmanuel Macron has indicated he may push to activate the EU’s so-called anti-coercion instrument, a tool designed to respond to economic pressure from outside the bloc. Germany, however, appears more cautious. Chancellor Friedrich Merz said Monday that Germany’s heavy reliance on exports makes it less inclined to deploy such measures. Trump, for his part, doubled down on his Greenland ambitions, suggesting the EU would not mount significant resistance.

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Despite broad weakness across global stock markets, South Korea stood out. Local equities extended their rally to a record-matching 13 consecutive sessions. The Kospi index, often viewed as a proxy for AI-related investment themes, ranks as the world’s second-best performing equity gauge so far this year. Shares in Taiwan also edged higher.

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According to Derek Tay, head of investments at Kamet Capital Partners, many Asian markets have largely brushed off the US-Europe trade dispute. “Some strategists on Wall Street still argue that any tariff-driven pullback in equities should be seen as a buying opportunity,” Tay said. “That said, investors should be prepared for continued policy-related volatility, especially when headlines emerge over weekends.”

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In Asia, attention also turned to Japan’s bond market. The yield on Japan’s 40-year government bond climbed to around 4% on Tuesday, the highest level since the instrument was introduced in 2007. Demand at a separate sale of 20-year government bonds came in below its 12-month average, underscoring investor caution toward long-dated debt.

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Globally, bonds have struggled at the start of the year after closing out their strongest annual performance since 2020. Investors are increasingly demanding higher yields to offset stubborn inflation pressures and rising government borrowing needs. “The long end of sovereign yield curves around the world looks vulnerable,” said Andrew Ticehurst, a senior rates strategist at Nomura Australia in Sydney.

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Ticehurst added that uncertainty continues to swirl around the Federal Reserve’s independence, speculation that BlackRock executive Rick Rieder could be nominated as the next Fed chair, and the possibility of a Supreme Court ruling that could strike down some of Trump’s tariffs. Any of these developments could intensify concerns about the US fiscal outlook.

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With US markets closed on Monday, investors have yet to fully price in the impact of the latest geopolitical escalation, according to Kyle Rodda, a senior analyst at Capital.com. Trump is scheduled to speak at the World Economic Forum in Davos on Wednesday, an event that markets will be watching closely. “All eyes will be on Davos and on what President Trump says about the US bid to acquire Greenland,” Rodda wrote, noting that his comments could set the tone for global markets in the days ahead.

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