"Wall Street Games Out What Trump Tariffs Mean for World Markets"
World equity markets, cash and futures, are trading down 2% to 4%.
From Bloomberg, April 4 Updated on April 2, 2025 at 4:29 PM PDT:
Wall
Street traders were left reeling after Donald Trump made good on his
threat to disrupt the modern trading order at the climax of ‘Liberation
Day.’
Billed as the biggest shake-up of cross-border commerce in decades, the president unveiled sweeping tariffs
Wednesday with a minimum 10% on all exporters to the US. Among the most
notable: the European Union faces a 20% levy, Japan a 24% tariff while
China will be hit with an even higher
rate.
Stocks
plunged in after-hour trading, haven assets rose and oil dropped on
demand fears, as fresh volatility hits world markets.
Strategists
and money managers are now poring over the fine print of the upcoming
import taxes. With still-protracted trade negotiations ahead, amid
already deteriorating US economic data, the bearish case remains intact
for risk assets in the near-term.
One
bullish view flips that script altogether, on the basis that greater
clarity on commerce policy will eventiually spur dip-buyers to rebuild
exposure to beaten-up corners of stock and credit markets.
Here’s how strategists and investors are reacting to the convention-defying trade measures:
“This
looks like it will net out to be worse than the 20% plan. Considering
all of the US products manufactured in Asia, these tariff rates of ~20%
to ~34% are steep. I see Taiwan is 32%, which will restrain the
semiconductor space. That should slow trade and raise prices, squeezing
profit margins. This will further slow a decelerating economy as it
creates friction and distortion in global trade. I think we need to
expect retaliation — which will likely lead to further escalation.”
“There
was not the kind of last-minute relief that some investors had been
hoping for recently. So, it looks like the Trump Administration is not
worried about the near-term impact these tariff policies will have on
the markets.
This
means the focus on earnings guidance over the coming weeks will be
intense. If earnings estimates continue to decline, it will create even
stronger headwinds for the stock market.”
Chris Zaccarelli, chief investment officer at Northlight Asset Management:
“If
there is going to be a silver-lining - and this remains to be seen -
then hopefully these tariff rates are only the beginning of a
negotiation which will bring rates down across the board.”
Steve Chiavarone, head of multi-asset group at Federated Hermes:
“If
today’s announcement marks the most draconian levels of tariffs — and
the news flow from here is about how countries are negotiating
reductions to these rates — that could be good for markets. This may
create enough of a sell-off over the next day or so that it creates a
buying opportunity. Worst-case scenario today would’ve been at a low
rate with threats of escalation. I’d rather, at this point, have higher
rates with the potential to deescalate.”
Priya Misra, portfolio manager at JPMorgan Asset Management:
“We
have been positioned into ‘Liberation Day’ via owning high-quality
credit and have been buying duration in the intermediate sector to hedge
if the economic hard data slows. We still like this position heading
into payrolls on Friday. There is a stagflationary impulse with tariffs,
which will force the Fed to be behind the curve.
The
economy and the market is grappling with many different cross currents
with downside risks to growth : 1) Tariffs (which are a tax on consumers
and/or corporates) 2) Cutting government spending via DOGE 3)
Uncertainty. I am most concerned with the uncertainty aspect, which is
affecting businesses and consumers. If the next few months or quarters
are spent in trade negotiations, that uncertainty remains high. I worry that some of the damage has been done already, so I worry about the growth implications.”
Ed Al-Hussainy, rates strategist at Columbia Threadneedle....
