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Trump’s Tariffs Will Be ‘Kind’
The Trump administration is expected to remove trade imbalances with other countries by imposing tariffs on US goods that match those levied by other nations. Trump recently stated that tariffs ‘will be far more generous than those countries were to us’ and emphasised the point by adding that the tariffs ‘will be kinder’.
While Trump has framed reciprocal tariffs as a day of liberation for Americans, the reality is quite different for US businesses and consumers. Expectations and concerns of higher prices, softening consumer confidence, and ongoing on-and-off tariff threats have caused substantial doubt. Ultimately, while Trump’s announcement tomorrow will increase the overall weight of tariffs, analysts hope that Liberation Day will help clear the fog of uncertainty. In my opinion, definitive guidance from Trump still seems unlikely. Only time will tell.
What Countries Will Be Tariffed?
The size and specifics of proposed tariffs remain unknown. Nevertheless, earlier in March, Treasury Secretary Scott Bessent coined the ‘Dirty 15’, identifying 15% of economies that contribute most to trade imbalances. While Bessent did not offer extensive detail, I would expect the countries in which the US has the largest trade deficits to be impacted.
According to the ‘US International Trade in Goods and Services, December and Annual 2024’ report, countries with the largest deficits recorded with the US include the following (in billions of US dollars):
- China (US$295.4)
- EU (US$235.6)
- Mexico (US$171.8)
- Vietnam (US$123.5)
- Ireland (US$86.7)
- Germany (US$84.8)
- Taiwan (US$73.9)
- Japan (US$68.5)
- South Korea (US$66.0)
- Canada (US$63.3)
- India (US$45.7)
- Thailand (US$45.6)
- Italy (US$44.0)
- Switzerland (US$38.5)
- Malaysia (US$24.8)
- Indonesia (US$17.9)
- France (US$16.4)
- Austria (US$13.1)
- Sweden (US$9.8)
How Have Markets Responded?
Risk-off sentiment dominated the market open yesterday amid anxiety heading into Liberation Day; however, global equities eventually recovered into the close. The S&P 500 ended Q1 25 in the red, down 4.6%, pencilling in the worst quarter since 2022 and its first losing quarter since 2023. Although sentiment remains cautious ahead of tomorrow’s tariff announcement, Asian and European shares have rebounded today, with US stock futures moderately lower as of writing.
Technically, while the S&P 500 continues to tread water around weekly support at the 5,600 neighbourhood, the lack of energy from bulls here places a bold question mark on daily support from 5,570. This potentially unearths a bearish scenario towards another layer of daily support at 5,405.
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