Trump's Tariff Impact: Eurozone Bonds React

Eurozone bond yields fell after U.S. President Trump's announcement of a 25% tariff on imported vehicles, raising concerns for Germany's car-dominant economy. German 2-year bonds dropped to their lowest since March, while bets on ECB rate cuts increased. The tariff's effect is anticipated to pressure economic performance.

In a significant reaction to United States President Donald Trump's announcement of a 25% tariff on imported vehicles, shorter-dated euro zone bond yields saw a dip on Thursday. This strategic decision by Trump could potentially dent the euro zone's economy, particularly impacting Germany's car manufacturing sector.

Early Thursday trading revealed that Germany's 2-year bond yield plummeted by as much as 5 basis points, marking a shift to 2.07%, the lowest since March 4. Simultaneously, traders increased their bets on European Central Bank interest rate cuts, pricing in a rate decrease to 1.95% by the year's end, down from 1.98% the previous day.

The effects of the new tariffs, set to commence on April 3, were observed across the board. The German economy, already under pressure, is predicted to face increased challenges as imports of vehicles into the U.S. totalled $217 billion in 2024, with a substantial share originating from Germany.

(With inputs from agencies.)