President Trump’s latest tariff salvo and July’s non-farm payrolls report conspired to send investors running for the hills on 1 August as volatility spiked, stocks tanked, and two-year treasury yields plummeted by more than a quarter of a percentage point.

Further jangling investors’ nerves, Trump said he would fire Erika McEntarfer, commissioner of the BLS, (Bureau of Labor Statistics) after the agency sharply revised down May and June’s jobs reports by a combined 258,000, the most since the pandemic.

Claiming political interference Trump said on social media: ‘I have directed my Team to fire this Biden Political Appointee, IMMEDIATELY. Important numbers like this must be fair and accurate, they can’t be manipulated for political purposes.’

The US dollar index, representing the greenback’s value against a basket of currencies fell 1.4%, potentially reflecting some erosion of confidence in the credibility of US institutions.

The BLS reported that the US economy added just 73,000 jobs in July, undershooting the 104,000-consensus estimate, while the unemployment rate ticked up to 4.2%, in line with forecasts.

Futures markets priced in a greater chance of a September rate cut with odds rising to 60%, compared with 40% before the jobs report.

The 31 July FOMC (Federal Open Markets Committee) meeting saw two members dissent on the Fed’s decision to leave interest rates unchanged, the most governor dissents since 1993.

In another unexpected development, on 1 August Fed governor Adriana Kugler announced she will be stepping down on 8 August, opening the door for Trump to appoint his candidate for the next chair.

On the eve of the 1 August tariff deadline Trump announced new reciprocal tariffs on countries which have yet to negotiate an agreement, which are expected to come into force on 7 August.

For those nations that have a framework deal in place such as the EU and Japan, a floor rate of 15% appears to be the norm, applying to over 40 countries.

Notable exceptions above 15% include Brazil which faces a tariff of 50%, Switzerland at 39%, India at 25%, and Vietnam and Tiawan at 20% apiece. Mexico has agreed a 90-day continuation of existing 25% tariffs.

Canadian goods outside the US-Canada-Mexico free-trade agreement will now face a 35% tariff, up from 25% previously. The US and China are still negotiating with the current 30% levy running out on 12 August.

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