Global markets were pummelled on Wednesday as President Donald Trump's eye-watering 104% tariffs on China took effect, and a savage selloff in US bonds sparked fears that foreign funds were fleeing US assets.
This week has brought crisis-era volatility to markets, wiping off trillions of dollars in value from stocks and hitting commodities and emerging markets with force.
At the epicentre of the rout on Wednesday were US Treasuries and the dollar, effectively the backbone of the global financial system.
Many now fear Trump's wide-ranging tariffs will be severe enough to trigger a recession and force the Federal Reserve into cutting interest rates and dumping their Treasury holdings, which drove up yields as bond prices dropped.
The dollar - the ultimate safe-haven in times of turmoil - fell broadly, as investors dashed into the likes of gold and the Swiss franc, accelerating the flight from stocks and industrial commodities.
The benchmark US 10-year note yield was up 13 basis points on the day at 4.40%, bringing its rise over the last three days to nearly 40 bps, one of the most aggressive increases in such a short time frame in the last 25 years.
"Last week was an equity story but as ever, it's moved from an equity story to the more important bond story," Chris Beauchamp, chief strategist at IG, said.
"This is the financial plumbing and clearly, the plumbing has begun to seize up."
Potentially adding to the pressure on Treasuries was an auction of new 10-year notes later on - hot on the heels of a weak three-year sale the day before - that could prove a crucial litmus test of investor appetite for US government debt.
"This seemingly 'sell America' trade is one that's now dominating the rising recession risk theme that typically would have pushed yields down," economists at ING said.
Overnight, Washington confirmed 104% duties on imports from China would take effect at 12:01 a.m. Eastern Time (0401 GMT), as planned. That deadline passed with no new developments on trade.
"US and China are stuck in an unprecedented, and expensive, game of chicken, and it seems that both sides are unwilling to back down," said Ting Lu, chief China economist at Nomura.
The shifting headlines on tariffs and the spectre of a prolonged trade war between the world's two biggest economies has generated severe volatility across financial markets.
The S&P 500 was swept up in one of the biggest reversals in at least the last 50 years, with the benchmark index losing 4.2 percentage points from a positive start to a negative finish. The index has lost $5.8 trillion in stock market value, the deepest four-day loss since it was created in the 1950s.
The VIX index of equity volatility has shot to 60 this week, its highest since August.
In Europe, the STOXX 600 fell nearly 3% in early trading, bringing the loss in market capitalisation since April 1 - the day before Trump unveiled his tariffs - to around $1.4 trillion.
US stock futures were anchored in negative territory, down 0.3% on the day.
Late on Tuesday, Trump said China was manipulating its currency to protect against tariffs, but he thought China would make a deal at some point.
Analysts at JPMorgan believed the rapid escalation with US tariffs on China were disruptive enough to push the global economy into recession.
"Given the import bill from China, the China tariff alone amounts to a whopping $400bn tax hike on US households and businesses," they said in a note to clients. "The currency is likely to be a release valve for China policymakers."
Safe-haven currencies like the yen and Swiss franc found some more love, with the dollar skidding 0.9% to 145 yen and down 0.5% to 0.843 Swiss franc.
Oil prices fell as much as 4% as concern over the outlook for global energy demand outweighed any nervousness on the geopolitical front. Brent crude futures were last down 2.4% at $61.30 a barrel.
Gold regained its upward momentum and was last up 2% at $3,005 per ounce.
