UPDATE 1-German govt bonds rally as Trump tariffs prompt flight to safety

German government bond yields fell sharply on Friday to hit fresh all-time lows after U.S. President Donald Trump hit China with tariffs $300 billion of goods, prompting a sell-off in global equities and driving support for safe-haven assets.

Core eurozone bond yields hit new all-time lows on Friday after U.S. President Donald Trump vowed to impose a 10% tariff on $300 billion of Chinese imports from Sept. 1, increasing pressure on the U.S. Fed to ease policy. German 10-year government bond yields were down more than three basis points to new all-time lows of -0.529% , tracking the sharp move lower in 10-year U.S. Treasuries which fell 13 basis points on Thursday to 1.876 %.

Long-dated German bond yields also fell, with the 30-year touching a low of 0.039% and moving ever closer to zero. The announcement on Thursday extends Trump's trade tariffs to nearly all of the Chinese goods the United States imports and marks an abrupt end to a temporary truce in a trade row that has hurt world growth and disrupted global supply chains.

China's foreign ministry said on Friday it will have to take countermeasures and doesn't want a trade war, but isn't afraid of fighting one. Analysts say the tariffs increase pressure on the U.S. Federal Reserve to ease policy, with the market now pricing in a 60% chance of a 50 basis point cut by the October meeting. The Fed cut rates by 25 bps for the first time since 2008 on Wednesday.

"There is a bit of a doom loop because Trump can take this action because the economy is doing OK and stocks are high," said Lyn Graham Taylor, rates strategist at Rabobank. "The more the Fed eases, the more aggressive a stance Trump can take on China. The market always thinks the Fed will step up." Other core eurozone bond yields were around two basis points lower, while 10-year Italian bond yields were up six basis points, in keeping with the broader risk-aversion in markets.,.

U.S. non-farm payrolls data and factory orders will be closely watched and could prompt a reversal of the sharp falls recorded in early trade. "The market is teed-up for a bit of a pullback as there was a big move yesterday on weak data and the Trump tariff message," said Graham Taylor. "If there is a decent print, there could be a turnaround."

U.S. President Donald Trump is scheduled to make a statement on trade with the European Union at 1345 EST (1745 GMT) on Friday, Bloomberg reported citing daily White House guidance.