By Jamie McGeever

ORLANDO, Florida (Reuters) - - TRADING DAY

Making sense of the forces driving global markets

By Jamie McGeever, Markets Columnist

Just when a degree of calm appeared to have settled over world markets, despite a worrying spike in many countries' long-term bond yields, U.S. President Donald Trump gave the world a stark reminder on Friday that his trade war is far from over.

In threatening 50% tariffs on European goods effective June 1 and floating a 25% charge on Apple iPhones sold in the U.S., Trump shook investors from any complacency the recent de-escalation may have cultivated.

European and U.S. stocks slumped - the S&P 500 sealed its steepest weekly fall since March - ensuring it will be a nervy and anxious long weekend for investors. U.S. and UK markets are closed on Monday for holidays.

The optimistic view is this is a familiar negotiation tactic - come out all guns blazing, create chaos, secure concessions, retreat, then claim victory since whatever deal is struck is nowhere near as bad as the original worst-case scenario.

Analysts at Citi are confident tariff fears are contained, and that a 50% levy on Europe won't last long even if it is implemented. The downside for risky assets is "manageable".

This may be the path U.S.-Europe talks follow, as appears to be the case with the U.S.-China negotiations. But large doses of uncertainty and risk have been injected back into markets, and investors must price assets accordingly.

Barclays economists estimate that if 50% tariffs on EU goods are realized, the overall trade-weighted tariff rate on all U.S. imports would rise to 21% from 14%, and an extra 0.5 percentage point hit to GDP growth would put the U.S. economy on the brink of recession.

The other main focus for investors this week was sovereign bonds, specifically longer maturities, in many G7 countries including the U.S., Japan and Britain.

Weak auctions, debt and deficit worries, and policy paralysis fears pushed long-dated yields to multi-year or record highs. Moody's stripping the U.S. of its triple-A credit rating a week ago also weighed on the price of Treasuries.

Worryingly, rising U.S. Treasury yields offered no support to the dollar and finally started to weigh on Wall Street. Indeed, the slump in U.S. stocks immediately after Wednesday's 20-year note auction was the third-worst market reaction to a bond auction ever, according to Kevin Gordon at Charles Schwab.

The U.S. and UK holiday on Monday and month-end flows were always likely to distort markets next week. A re-escalation of global trade tensions and historically high bond yields are now in the mix too.