Stocks, long-dated US Treasuries, and the dollar fell sharply on Tuesday as investors reacted to renewed trade tensions between the United States and Europe. The declines reversed gains recorded earlier in the week, reflecting growing market uncertainty.

President Donald Trump’s renewed threat to impose tariffs on European imports sparked a repeat of the “Sell America” trade seen after last year’s April tariff announcement, prompting investors to pull back from US assets.

Wall Street’s key measure of investor anxiety, the Cboe Volatility Index, climbed 1.9 points to an eight-week high of 20.69. The S&P 500 Index fell 1.1 per cent to 6,859 points.

“We have certainly seen a meaningful reaction in the risk metrics since Friday; it’s a very significant shift,” said Jim Carroll, senior wealth adviser and portfolio manager at Ballast Rock Private Wealth in Charleston, South Carolina. He noted, however, that the move did not indicate extreme market panic.

Analysts said the rise in volatility was partly anticipated following last week’s monthly equity options expiration. “It’s a standard reaction to geopolitical turmoil: take equity risk off the table, buy gold, buy cash. That’s essentially what we’re seeing,” said Alex Morris, CEO and CIO of F/m Investments.

In currency markets, the safe-haven US dollar dropped 0.6 per cent against a basket of peers to a more than two-week low, even as one-month implied volatility for the euro surged to 6.03 per cent.

Michael Brown, a market analyst at online broker Pepperstone in London, added that further volatility could occur if progress toward resolving the tariff threats remains limited.