U.S. equities saw their sharpest decline in weeks, as investor sentiment deteriorated amid rising geopolitical and trade-related uncertainty. The S&P 500 closed down 3.5%, reversing the previous session’s rebound and underscoring renewed concerns over the fallout from escalating U.S.-China tensions. Treasury demand climbed as market participants rotated into haven assets, while the dollar extended its slide to multi-month lows.

The sharp downturn followed a wave of optimism that had briefly lifted risk assets, driven by perceived progress in U.S. trade negotiations. However, a lack of tangible developments—combined with the White House’s move to increase tariffs on Chinese imports to 145%—fueled broad skepticism regarding the administration’s ability to secure a near-term resolution. President Trump’s comments suggesting proximity to a “first tariff deal” failed to reassure markets in the absence of specifics, with investor focus shifting to the growing threat of systemic drag on global demand.

The dollar index fell to levels not seen since October, reflecting both diminished confidence in U.S. growth resilience and a potential recalibration of Federal Reserve policy expectations. A robust $19 billion auction of 30-year Treasuries failed to ignite a rally in risk assets but underscored a strong bid for duration amid rising volatility and capital preservation flows.

Meanwhile, oil and other cyclical commodities dropped in tandem with equities, reflecting concerns that a prolonged dispute between the world’s two largest economies may weigh more heavily on global industrial activity. The latest retracement in riskier assets follows statements from National Economic Council Director Kevin Hassett, who asserted that discussions with U.S. trade partners were “well advanced.” Markets, however, appear increasingly doubtful that negotiations will reach resolution before further economic disruption sets in.

Early signs of a broader trade-induced slowdown are beginning to surface globally, with corporates pausing procurement cycles in anticipation of heightened uncertainty. As trade policy becomes increasingly unpredictable, pressure is mounting on central banks and governments to deliver counter-cyclical responses.

The risk landscape remains fluid. Investors are recalibrating exposures as the prospect of entrenched protectionism threatens to reshape growth trajectories across key markets.