Stock prices and bond yields dropped on Tuesday as investors worldwide sought safety following the United States' decision to impose heavy tariffs on Canada, Mexico and China, sparking fresh trade disputes with its three largest trading partners.
European stocks slid 1%, falling back from record highs, with automakers' shares vulnerable to trade duties and losing 3%. Aerospace and defense stocks hit a record high, however.
Government bond yields fell. U.S. 10-year Treasury yields dropped to 4.115%, their lowest since October, while yields on German 10-year bonds, a benchmark for the eurozone, also slid.
Other riskier assets lost ground too, with bitcoin slipping under $84,000, erasing a surge at the start of the week. The risk-sensitive Australian dollar fell, too.
MSCI world equity index, which tracks shares in 47 countries, fell 0.2%.
Still, U.S. futures gained almost 0.3%, signaling that the sell-off may peter out globally. The S&P 500 is down about 5% from its Feb. 19 all-time closing high as tariffs exacerbate concerns about growth.
Investors were also unnerved by U.S. President Donald Trump's pausing military aid to Ukraine following his clash with Ukrainian President Volodymyr Zelenskyy last week, deepening the fissure that has opened between the one-time allies.
"Everyone is caught by the onslaught. You have the news on tariffs, the news on Ukraine," said Samy Chaar, chief economist and chief investment officer for Switzerland at Lombard Odier, a private bank in Geneva.
"It means that you create uncertainty, and when you have that on markets, investors get back to base."
China swiftly retaliated against the tariffs, announcing on Tuesday that there would be 10%-15% hikes in import levies covering a range of American agricultural and food products.
In Asia, equities tracked the biggest losses on Wall Street this year from overnight, where the S&P 500 slid 1.8% and the tech-heavy Nasdaq dropped 2.6%.
Japan's Nikkei fell 1.6% and Taiwan's benchmark lost 0.5%. Hong Kong's Hang Seng Index fell 0.4%.
Crude oil settled at the lowest levels since early December amid reports that the OPEC+ group of major producers, consisting of the Organisation of the Petroleum Exporting Countries (OPEC) and allies like Russia, will proceed with a planned oil output increase in April. Brent futures fell 1.4% to $70.61 a barrel.
Market players were also concerned about the fallout of the U.S. economy, especially given the recent run of soft data.
Those worries escalated on Monday, with figures showing that U.S. factory gate prices jumped to a nearly three-year high and that materials deliveries were taking longer, suggesting that tariffs on imports could soon hamper production.
Higher China tariffs "will likely hurt the U.S. itself as it needs cheap Chinese products to bring down inflation," said Wang Zhuo, partner of Shanghai Zhuozhu Investment Management.
Likewise, "higher tariffs on U.S. agriculture products will also negatively impact China," but countermeasures are politically necessary "so it would be wise to make some symbolic move without triggering an escalation in tensions," Wang said.
The Canadian dollar and Mexican peso weakened, while the Aussie dollar sank to a one-month low.
However, China's yuan bounced off its lowest level since Feb. 13 in offshore trading, with the People's Bank of China continuing to guide the currency firmer via the official fixing.
Sterling held close to a 1 1/2-month high and the euro was also firm after a 1% rally on Monday as European leaders drew up a Ukraine peace plan to present to Washington.
Bitcoin fell below $84,000 as optimism about a so-called strategic U.S. cryptocurrency reserve quickly waned, a day after Trump named five tokens, including bitcoin, to be part of the plan.
