Trump’s “Liberation Day” Tariffs: How are markets reacting?

• President Trump unleashed "universal" and "reciprocal" tariffs on over 60 countries
   
• US dollar set for biggest one-day drop since Nov 2022
   
• US500 and NAS100 stock indexes now at lowest since Sept 2024
   
• Gold hit new record high before pulling back
   
• Safe havens, JPY and CHF, are top-G10 gainers against USD today
   
• Trade uncertainties not over; expect more market volatility ahead

Global financial markets have been shocked by US President Donald Trump’s latest wave of tariffs.

Not even 3 months have passed into his second term as POTUS, yet Trump has delivered on his tariff threats.

What did Trump announce?

• Universal tariffs of 10% minimum to be applied on all exporters into the US starting April 5th, 2025.
   
• Reciprocal tariffs on 60 countries, as high as 50% on Lesotho as well as Saint Pierre and Miquelon, starting April 9th, 2025.

All this adds up!

For instance, this latest announcement brings total US tariffs imposed on Chinese goods to at least 65%, according to Morgan Stanley.

Overall, according to Bloomberg Economics calculations, the average effective US tariff rate is around 23% - the highest in over a century!

President Trump is in the throes of reshaping the global trade order at a magnitude not seen since 1930!

How are markets reacting?

In our preview article published yesterday (Wednesday, April 2nd), in the lead up to this pivotal announcement, we wrote ...

“Wednesday, April 2nd 2025 is set to be a big day for governments, businesses, investors, and traders around the world.”

Indeed, it was!

And markets have reacted in line with our “worst-case scenario” cited in yesterday’s article:

• “US assets FALLING”

US dollar index (USDInd) is falling 1.8% - set to be its biggest one-day drop since November 2022; now trading around levels not seen since October 2024.

US500 and NAS100 stock indices have plunged to their lowest levels since September 2024 respectively.

US30 index has raced southwards towards its year-to-date low from mid-March.

• “Safe havens SOAR”

Gold briefly posted a new record high at $3167.71 before falling, as investors likely cashed out profits to perhaps cover up losses in other parts of their portfolio.

The Swiss Franc and Japanese Yen are 2 of the top 3 biggest G10 gainers against the US dollar today (Wednesday, April 3rd), sandwiching the Swedish Krona in 2nd place. Each are soaring about 2.2% – 2.5% against the greenback today.

In fact, all G10 currencies are strengthening against the US dollar so far today.

Any positive outcomes?

To be fair to President Trump, there are early signs of his tariffs having the intended effect:

• OPEC+ has responded with a larger-than-expected supply hike!

Starting next month, OPEC+ members will restore 411,000 barrels per day (bpd) into global markets. 

That’s equivalent to a 3-in-1 ramp-up to its previously planned 138,000 bpd output hike per month.

This should hearten motorists around the world, especially among Trump’s voter base at least in the immediate future.

• Volvo and Mercedes-Benz Group are looking to ramp up their respective output in the States. 

However, Volkswagen and Ferrari have announced plans to hike car prices in the US.

What’s next?

• Full-blown global trade war?

With the likes of China and the EU already threatening retaliation, a tit-for-tat trade war is bound to sour the global economic outlook.

• US stagflation, or recession?

The initial fear is that these tariffs could lead to an increase in US consumer costs while acting as a drag on economic growth.

A major slowdown in the world's largest economy is bound to negatively affect the rest of the world.

• More market turbulence ahead?

Investors and traders are set to be held hostage by the twists and turns in the global trade order.

From country leaders to business decision makers, the world will be looking out for either from positive negotiations as governments seek a diplomatic off-ramp, or retaliatory tariffs.

Questions remain about how long these just-announced tariffs will be imposed for.

Overall, brace yourselves. Markets are set to remain sensitive to the Trump-led trade war for a while more.