Market Commentary: Thursday 3rd April

Liberation Day has been and gone. The headlines: a 10% tariff will hit all exporters to the US, with additional duties targeting countries where the US has the largest trade imbalances (see image below). The key with these tariffs is the speed of implementation—Saturday marks the start of the effect, with higher duty taxes coming into force on April 9th. The plan is to use this as a starting point to force negotiations toward a resolution.

Risk-off has been the outcome, along with USD weakness. The DXY has broken well below its lows for the year, and EUR/JPY sold off 0.5%. Global equities are sliding—S&P 500 futures are down 2.9%. Gold remains comfortably above $3,100 and was notably left out of any tariff announcements.

Responses are expected to be swift. Major trading partners China and the EU, subject to 34% and 20% tariffs respectively, have previously signalled they will take a firm stance. China has already pledged to "hit back." US officials are urging against retaliation and are encouraging open dialogue, warning that any countermeasures could escalate the trade war and further fuel the risk-off sentiment.

Retaliation is now the focus—let’s see how this pans out.

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