ISTANBUL

US President Donald Trump’s inconsistent statements and unpredictable actions regarding tariffs have led to increased risks and volatility in financial markets, including his latest decision concerning the European Union.

Trump shifted from threatening to impose 50% tariffs on imports from the EU beginning June 1 to a surprising announcement that he would delay the decision until July 9 following a call with European Commission President Ursula von der Leyen.

While a 90-day tariff pause and reduction between the US and China implemented on May 12 eased tensions for some time, tariffs are still in place, albeit lower than before, leaving room for potential new trade conflicts.

As the global economy struggles to overcome the numerous uncertainties plaguing markets, a change next year in the leadership of the US Federal Reserve is also pushing investors to adopt new strategies.

Uzeyir Dogan, deputy general manager at Istanbul-based A1 Capital, told Anadolu that challenges in global markets have only intensified since Trump took office for his second term in January and that market volatility could continue for a long time.

“Before the 90-day tariff pause expires, Trump’s tariff rhetoric towards the EU raised concerns,” he said. “While we reach the end of the 90-day tariff pause, uncertainties will remain high and some countries may start being concerned over new tariffs, even though China and the EU remain the primary focus.”

Dogan said the World Uncertainty Index reached its highest point in recent years despite a decline in the last two to three weeks, and he estimates that the index is likely to rise after Trump’s statements, which may translate to volatility in markets.

He noted that permanent tariffs could mean a further slowdown in global economic growth, negatively affecting developing countries.

Dogan highlighted that the US’s tariffs on Türkiye remain low, which spells positive export potential for the country, but the slowdown in global growth will indiscriminately impact every country at varying degrees.

Inflation estimates determine bond prices, yields

Dogan noted that trade wars could deepen as countries respond to US tariffs while investors turn to safe-haven assets such as gold and bonds.

“Inflation estimates mainly determine bond prices and yields,” he said. “There is serious uncertainty over US inflation as of now.”

“Bond prices fell, so interest rates rose, and while the agreement between the US and China rekindled some expectations of a slower pace in the rise of import prices, this pushed bond prices up amid the high uncertainty,” he added. “It’s hard to tell what Trump will do next.”

Dogan said that Fed Chair Jerome Powell’s term ends in May next year and Trump may end up appointing the new chair, which would raise concerns over the future chair’s policy-making independence.

“Many countries’ central bank presidents are faced with such tests at the beginning of their terms,” he said.

He emphasized that recent developments are the main factor influencing prices according to general market opinion, prompting investors to focus on more short-term developments.

“As we approach May next year, we may continue to feel the concerns over the leadership change at the Fed,” he said. “This situation may reflect positively on the markets.”

“Expectations that interest rates will fall further under the conditions of when the new chair is appointed could suddenly push prices in markets upwards,” he added.