What you need to know

At one minute past midnight on Tuesday, President Donald Trump’s punitive tariffs against China—reaching as high as 104%—came into full force, marking the most severe trade restrictions imposed by the United States since 1909. Additional levies will follow in phases: beginning 2 May, all goods shipped from China or Hong Kong via national carriers to the U.S. Postal Service will face a surcharge of 90%, or $75 per parcel, whichever is higher. This will rise to $150 on 1 June. Packages delivered entirely through private couriers such as FedEx, UPS, or DHL will be exempt—an apparent attempt to cripple platforms like Temu and Shein, which rely on bulk postal distribution.

Markets responded in kind. Tokyo’s Nikkei 225 tumbled by 5%, while the S&P 500 closed down 1.6%, having erased a brief morning rally of 4.1%. The Nasdaq fell 2.1%, and the Dow Jones shed 0.8%.

Oil prices dipped below $57 per barrel for the first time since 2021, and Goldman Sachs is warning that $40 oil is not impossible.

Bond markets fared no better: yields on 10-year U.S. Treasuries surged to 4.5%, with 30-year yields touching 5%—their highest since February. The euro now trades at 1.105 to the dollar, which itself has reached its strongest level against the yuan since 2007. Yet China, too, is letting its currency slide—softening the blow of tariffs on its exports by improving price competitiveness globally.

The bond market, however, is flashing deeper warnings. China, which holds significant U.S. debt, appears to be dumping Treasuries in retaliation. The result—rising yields and tightening financial conditions—is precisely the opposite of what the Trump administration seeks. Without an emergency rate cut and immediate quantitative easing, some analysts fear a rerun of the 1987 crash. Long-term rates are rising rapidly, inflation is climbing again, GDP is projected to contract for multiple quarters, and consumer sentiment is nearing pandemic-era lows. The U.S. stock market is now deep in bear territory.

International retaliation is widening. Canada will impose a 25% tariff on American auto imports that do not comply with the USMCA trade agreement. China has vowed to “fight to the end,” threatening additional countermeasures. China has lifted tariffs on all imports from 33 African countries. South Korea has launched a ₩3trn ($2bn) emergency support program for its auto industry—its largest export sector to the U.S.—which it says faces a “significant shock” from the 25% auto tariff. The package includes state-backed loans and increased subsidies for electric vehicles.

Testifying before the Senate Finance Committee, U.S. Trade Representative Jamieson Greer claimed the tariffs are delivering results, noting that roughly 50 countries have sought exemptions. Yet even he conceded that the transition “might be challenging at times.”

With the largest wave of protectionist measures in over a century now active, the world economy faces a volatile mix of rising interest rates, rising bond yields, falling growth, and a U.S. administration willing to gamble on extreme brinkmanship. The question is no longer whether the tariffs will bite—but how deep, and how fast.

It’s now the U.S. vs China, everyone else needs to pick a side

Ukrainian President Volodymyr Zelensky claimed that Ukrainian forces had captured Chinese nationals fighting alongside Russian troops in eastern Ukraine. “This is another country that militarily supports Russia’s invasion of Ukraine,” he said. Zelensky noted that while North Korean personnel were assisting Russia, they had not been found operating inside Ukraine, and although Iran had provided weapons, it had not deployed troops.

Two Chinese fighters, aged 33 and 31, were reportedly detained in Donetsk with documents and bank cards confirming their identities and nationalities. It remains unclear whether they were acting as independent mercenaries or as members of the Chinese armed forces.

Western officials said that while some Chinese nationals have joined the conflict voluntarily, they have seen no definitive evidence of state sponsorship. Zelensky said he believes more Chinese nationals are embedded with Russian forces and has instructed Ukrainian intelligence services to investigate further.

He has also directed Foreign Minister Andriy Sybiha to seek clarification from Beijing. On Monday, Zelensky confirmed for the first time that Ukrainian forces are operating inside Russia’s Belgorod region—a move he described as “absolutely justified” to protect communities in northeastern Ukraine. Meanwhile, Russia claimed on Tuesday that it is close to expelling Ukrainian troops from its Kursk province.

Spain’s government announced on Tuesday that it would increase defense spending by €2.08bn ($2.28bn) this year by reallocating funds from other parts of the budget. Earlier this month, Defense Minister Margarita Robles said that Madrid would raise defense spending to 2% of GDP well before the previously stated 2029 target. However, she declined to set a specific date. Meeting the 2% threshold would require an additional €10bn ($10.8bn) annually.

Spain currently has the lowest defense spending among NATO’s 32 members, at just 1.3% of GDP. Political support for increased defense outlays is limited. The center-left Socialist Party governs in coalition with hard-left and regionalist parties, including Catalan and Basque separatists, many of whom oppose higher military spending. Geographically removed from the Russian front, Spain sees little direct threat from Moscow.

Nevertheless, Prime Minister Pedro Sánchez has been a vocal backer of Ukraine. He has visited Kyiv multiple times and in February pledged a €1bn military aid package as part of a ten-year Bilateral Security and Defense Agreement signed in May 2024.

The planet will be fine, it’s the humans who should be worried

The European Union’s Copernicus Climate Change Service announced on Tuesday that the continent experienced its hottest March on record. It was also the second warmest March globally. Average land temperatures in Europe reached 6.03°C, 2.41°C above the March average for 1991–2020.

Samantha Burgess, the agency’s strategic lead, noted that extremes in both rainfall and drought were observed across the continent. “Many areas recorded their driest March on record, and others their wettest in at least the past 47 years,” she said. Climate change is exacerbating both droughts and heavy rainfall, often within the same season.

The United Kingdom and Ireland experienced a drier than average March, while the Iberian Peninsula endured significant rain.

Birth pangs in the birthplace of civilization

President Donald Trump said on Monday that the United States and Iran would begin direct negotiations over Tehran’s nuclear program in Oman on Saturday. Trump made the remarks during a joint press conference with Israeli Prime Minister Benjamin Netanyahu, describing the talks as “at a very high level” and warning that “Iran is going to be in great danger” if it does not accept a deal. Iran’s Foreign Minister Abbas Araqchi acknowledged the talks but said they would be indirect, contradicting Trump.

Iranian state media reported on Tuesday that Steve Witkoff, Trump’s presidential envoy, would lead the U.S. delegation. Araqchi will head Iran’s team, and Oman’s Foreign Minister Badr al-Busaidi will serve as host. Previous indirect negotiations during former President Joe Biden’s term were largely unfruitful. Trump has repeatedly stated he prefers diplomacy but remains willing to use military force against Iran’s nuclear infrastructure.

Initially, Tehran denounced Trump’s comments as threats and insisted it would not be coerced into talks. However, it is likely that Iran’s leadership, including Ayatollah Ali Khamenei, viewed Trump’s warnings as credible and gave the go-ahead for negotiations. Tehran has suggested it is open to a deal resembling the 2015 Joint Comprehensive Plan of Action. On Monday, Trump reiterated his red line: “Iran cannot have a nuclear weapon, and if the talks aren’t successful, I actually think it will be a very bad day for Iran.”

Trump withdrew the U.S. from the original agreement during his first term. Since then, Iran has steadily expanded its nuclear program, particularly during the Biden administration. In December, the International Atomic Energy Agency reported that Iran planned to accelerate uranium enrichment to 60% purity—close to the 90% threshold for weapons-grade material. Tehran insists its program remains civilian in nature. U.S. officials say Trump is demanding Iran fully dismantle its nuclear program. Israel has been urging the U.S. to carry out preemptive strikes to eliminate Iran’s nuclear infrastructure.

Instability from Sahel to Horn of Africa amid state fragility, Russian interference, & Islamist insurgencies

Ethiopian Prime Minister installs new leader in Tigray

Ethiopian Prime Minister Abiy Ahmed on Tuesday appointed a new leader for the northern Tigray region, which remains unstable amid internal factionalism and fears of renewed conflict between Ethiopia and Eritrea. Tadesse Worede, formerly Tigray’s deputy president, will lead the regional administration. He is aligned with a dissident wing of the Tigray People’s Liberation Front that has opposed the current leadership.

This faction had attempted to oust Tigray’s leader, Getachew Reda, who had governed the region since 2022 under the terms of a peace deal that ended the civil war between the federal government and Tigrayan rebels. The splinter group, led by Debretsion Gebremichael, has taken control of several towns, including Mekelle, the regional capital, and others near the Eritrean border. It has also been accused of seeking support from Eritrea.

During the war, Eritrea fought alongside the Ethiopian government but was excluded from peace talks—an omission that has since soured bilateral relations.

Gabon elections likely to cement power of coup leaders

Gabon is due to hold presidential elections on Saturday, in which interim President Brice Oligui Nguema, who seized power in a 2023 military coup and declared his candidacy last month, is widely expected to win. The coup ended 56 years of dynastic rule by the Bongo family. Nguema has won praise for ending the unpopular reign of Ali Bongo and has since consolidated control over key institutions, including the Senate, National Assembly, and Constitutional Court.

Under military rule, the economy has shown modest signs of recovery, growing 2.9% in 2024, driven by infrastructure projects and a boost in output of oil, manganese, and timber.

Also standing in the election is Alain Claude Billie By Nze, Bongo’s final prime minister, who is running as an independent and has tried to distance himself from the old regime. Gabon remains a former French colony with close, though increasingly fragile, ties to Paris.