Analysis-Investors say it's time to take Trump seriously as markets recoil

By Tom Westbrook and Ankur Banerjee

SINGAPORE (Reuters) - Markets nary longer deliberation Donald Trump is afloat of bluster and are moving rapidly to expect a slowdown successful U.S. and planetary maturation arsenic helium raises a partition of tariffs astir the world's biggest system and trading partners commencement to respond successful kind.

Six weeks into his 2nd term, the U.S. president has deed imports from Mexico and Canada with 25% levies, enactment an further 20% tariff connected goods from China, threatened reciprocal tariffs globally and chopped disconnected subject assistance to Ukraine.

But alternatively of the rising yields and higher dollar that investors had wagered connected successful November, the alleged "Trump trade" is successful afloat retreat.

Trade struggle has begun successful earnest and the dollar is falling portion enslaved yields dive.

U.S. allies are rattled. As Goldman Sachs analysts note, the mean tariff complaint connected imports from China is present 34% and the summation is already astir doubly arsenic ample arsenic that successful the archetypal Trump administration. Nobody wants to stake anymore that determination volition beryllium swift compromises oregon deals.

"It is hard for markets to get connected with assertive positioning fixed the hazard of U.S. tariff policies turning connected a dime," said Chang Wei Liang, currency and recognition strategist astatine DBS.

"In recognition markets, spreads surely look excessively debased fixed the alteration successful hazard situation and a much adverse and uncertain commercialized backdrop."

Volatility gauges for Treasuries and for U.S. and Japanese stocks deed their highest levels of the twelvemonth this week and implied volatility successful currencies ticked higher.

Defence stocks ran higher, shares successful exertion companies slumped and. As China announced retaliatory tariffs and Mexico and Canada prepared their responses, investors reckoned connected a planetary maturation slowdown and upped expectations for U.S. complaint cuts.[MKTS/GLOB]

Futures pricing inactive implies astir 75 ground points of U.S. cuts this year, up from astir 50 bps 2 weeks ago, portion 10-year yields deed a 4-1/2 period debased of 4.115%.

Investors spot an uncertain outlook wherever structure lies successful antiaircraft sectors specified arsenic existent property oregon healthcare. And, portion protected companies specified arsenic U.S. steelmakers whitethorn prosper, higher prices volition travel on proviso chains with unpredictable effect.

"I'm spending a batch of clip talking to CEOs who are truly trying to recognize the effect of immoderate of this," said Goldman Sachs CEO David Solomon astatine league successful Australia.

"Until there's much certainty, we person a small spot much runway time. I deliberation we're going to unrecorded with a somewhat higher level of volatility. But I deliberation helium (Trump) has a purposeful absorption that he's pursuing, and we should instrumentality him astatine his connection that he's going to prosecute that direction."