What a wild day in markets yesterday. It looked like we were bound for some pain early on in US trading before a fake headline sent markets into overdrive. If anything, it shows two things. One, that this is a market that is ready to rip on any positive headlines involving tariffs. Two, the unpredictability of Trump makes almost any headline to be conceivable.
Upon coming to terms with the fake news, we saw equities readjust lower. But a key takeaway was that it didn’t quite wipe out remaining dip buyers and they came back in late yesterday amid some hopeful optimism.
For one, the US showed some willingness in talks with Japan. And I think that’s a very big tell about Trump’s intentions when it comes to the tariffs approach. Sure, Japan is a close US ally so there might be some bias. But still, it shows some wiggle room and in all likelihood, I would expect tariffs against Japan to be watered down before the deadline tomorrow.
The second thing is Trump continuing to tweet and/or retweet things like these:
“Negotiations with other countries, which have also requested meetings, will begin taking place immediately.”
“More than 50 countries have reached out to the president to begin a negotiation…”
“Countries from all over the World are talking to us. Tough but fair parameters are being set.”
“Secretary of Treasury, Scott Bessent: Almost 70 countries have now approached us wanting to help rebalance global trade…”
As a reminder, Trump’s tariffs will go into effect in about 24 hours from now (9 April 12am ET). Even if some countries might not be able to secure any deals or strike a compromise by then, it doesn’t mean there won’t be one in the coming days/weeks.
So, that’s the main thing to watch out for. Trump will want to demonstrate his resolve by showing that he is serious on implementing tariffs. But given the above, it shows that they may not be permanent so long as there are trade negotiations taking place.
The only wildcard though remains China. And that is a big risk that broader markets shouldn’t ignore. An escalation in trade conflict between the two biggest economies in the world is bound to reverberate across the globe. So, that is one key factor that risk trades need to be wary about despite holding out some optimism.
This was Trump’s latest verbal barrage towards China overnight:
“Yesterday, China issued Retaliatory Tariffs of 34%, on top of their already record setting Tariffs, Non-Monetary Tariffs, Illegal Subsidization of companies, and massive long term Currency Manipulation, despite my warning that any country that Retaliates against the U.S. by issuing additional Tariffs, above and beyond their already existing long term Tariff abuse of our Nation, will be immediately met with new and substantially higher Tariffs, over and above those initially set. Therefore, if China does not withdraw its 34% increase above their already long term trading abuses by tomorrow, April 8th, 2025, the United States will impose ADDITIONAL Tariffs on China of 50%, effective April 9th
