[ROLLING ANALYSIS] Tariff update: The day after "Liberation Day"

"LIBERATION DAY"

OVERVIEW

US President Trump said for nations that treat the US badly, they will calculate the total rate charged, including non-monetary barriers and will charge them half of that rate and therefore won't be reciprocal.
Accordingly, he announced the US is to apply a 20% tariff on imports from EU, 34% tariff on imports from China, 26% tariff on imports from India, 25% tariff on imports from South Korea, 10% tariff on imports from UK and 24% tariff on imports from Japan. Trump also stated that the baseline tariff is 10% and announced 25% auto tariffs, while Canada and Mexico were not subject to reciprocal tariffs for now.
US President Trump's tariff order exempts gold, according to Reuters citing a White House fact sheet.
US Treasury Secretary Bessent said will have to wait and see on negotiations of tariffs and advised countries not to panic or retaliate, while he added the latest tariffs are at the high end of the number if there is no retaliation.
US senior official said the baseline tariffs rate will go into effect on April 5th at 00:01EDT and reciprocal tariffs will go into effect on April 9th at 00:01EDT, while President Trump’s automobile tariffs took effect 00:01EDT on April 3rd, according to the Federal Register.

NOTE:

Metal Tariffs - The US has excluded steel, aluminium, and gold from reciprocal tariffs, providing some relief to domestic buyers who are already paying 25% duties on these key metals used in industries like automobiles and appliances. A Senior White House official also noted that products covered by section 232 tariffs, including autos, steel, aluminium, copper and lumber will not be included.
Pharma Tariffs - The pharmaceutical industry received a temporary reprieve from the sweeping tariffs announced by President Trump, though the relief may be short-lived as the White House plans additional levies on pharmaceutical imports in the future, Bloomberg reports.

MARKET REACTION:

Global markets are risk-off following US President Trump's aggressive tariff announcement, with US and European equity futures falling, and Asian stocks tumbling.
The US 10yr yield dropped to a five-month low with the inflation implications currently dwarfed by the mass risk-aversion in the market.
Fed pricing looks for 82bps of easing by year-end vs. 76bps yesterday morning.
Investors have sought safe-haven assets like gold and the JPY with the former hitting another ATH.
European stocks (Stoxx 600 -1.2%) are lower after the tariff announcement, which includes a 20% levy on the EU; the EU has vowed to retaliate against the US' tariff plans; France Thursday said that the EU will likely respond to the tariffs in mid-April, and again in late-April. reiterating that it could target US digital services.
US futures are markedly lower: ES -3%, NQ -3.4%, RTY -4.1%.
Overnight, Chinese stocks trimmed early losses, with traders anticipating that the government would implement further measures to support the economy in wake of Trump's tariff announcements.

TARIFF BREAKDOWN

REACTIONS

CHINA

China's Commerce Ministry said China firmly opposes US reciprocal tariffs and will resolutely take countermeasures to safeguard its rights and interests, while it urged the US to immediately cancel unilateral tariff measures and properly resolve differences with trading partners through equal dialogue.

European Commission President von der Leyen said US tariffs are a major blow to the world economy and the consequences will be dire for millions of people around the world. Von der Leyen added that they are prepared to respond and are preparing further countermeasures on US tariffs if negotiations fail. Von der Leyen said the EU is preparing for further countermeasures to protect its interests and businesses if negotiations fail. EU retaliation may take about a month and a half to implement at the earliest.
FRANCE: French government said there will likely be a first response to the Trump-tariffs in mid-April and another late-April, and added they will respond along with Europe, and reiterated could target digital services - added that "we are ready in this trade war".
ITALY: Italian PM Meloni said US tariffs are wrong and she hopes to work with the US and Europe to avoid a trade war that would weaken the West.

UK Business Secretary said their approach to Trump's tariff announcement is to remain 'calm and committed' to doing economic deals with the US, while they have a range of tools at their disposal and will not hesitate to act.
UK Business Minister Reynolds said the government will not rethink its fiscal rules because of the US tariffs

CANADA

Canadian PM Carney said US President Trump's tariff announcement has preserved a number of important elements of their relationship, but said they are going to fight these tariffs with countermeasures and will act with purpose and with force, while he added Canada will respond to US tariffs on Thursday.

AUSTRALIA

Australian PM Albanese said US tariffs are totally unwarranted and Australia will not impose reciprocal tariffs, while they will continue to make the case for these unjustified tariffs to be removed from exporters. Albanese added the free trade agreement with the US does have dispute resolution mechanisms and they want this to be resolved in a way that avoids those contests.

LOGISTICS:

Hapag-Lloyd (HLAG GY) said there is increasing uncertainty due to imposed US tariffs and potential reciprocal tariffs from various nations. Tariffs could impact demand, cargo flows and costs - as such, may have to adj. the service network. Overall duration and impact of measures is hard to estimate at this point.
Sales of French wine/spirits are expected to fall by a minimum of 20% in the US after the Trump tariff measures, according to FEVS (French wine/spirit export body).

HOUSE VIEWS

Bloomberg: Bloomberg analysis suggests the tariff on all imports for China (54% tariff) will impact its GDP by 2.3%, for EU (20% tariff) GDP 1.1%, and for UK GDP (10% tariff) 0.2%.
Morgan Stanley: Morgan Stanley no longer expects the Fed to cut rates in June 2025, due to "tariff-induced inflation". Now expect the Fed to remain on hold until March 2026. MS said that if tariffs persist, US economic growth may suffer, with downside risks increasing. Effective tariffs could reach 22% versus 3% at the year's start, raising inflation risks and keeping the Fed from cutting rates in June. That said, it notes that legal challenges under IEEPA remain uncertain. MS recommends positioning for lower Treasury yields and a stronger JPY.
Citi: Citi estimates the tariff announcements will drive a 9% negative impact to Apple's (AAPL) total gross margins as a result of the 34% reciprocal tariff rate, given it has 90% of its manufacturing in China (Citi kept AAPL at a Buy rating, with a USD 275 PT).
JPMorgan: Downgraded emerging market currencies to underweight after US President Trump's tariffs "exceeded the worst case scenario".
CapEco: "The obvious winners were Canada and Mexico, which will still be subject to 25% tariffs but only on non-USMCA compliant imports into the US. Assuming the share of USMCA compliant shipments from both countries will quickly rise to ~80%, that implies an effective tariff of closer to 5%."
Wedbush: Wedbush said that the Trump tariff announcement was "worse than the worst case scenario" for Wall Street; Wedbush said tech stocks like Apple (AAPL) and Nvidia (NVDA) will face "major pressure" on the announcement, as the worries about demand destruction and supply chains.

TARIFF TIMELINE

February 1st - Trump signed an executive order to impose 10% tariffs on all imports from China and 25% on imports from Mexico and Canada starting Feb 4th.
February 3rd - Trump agreed to a 30-day pause on tariffs against Canada and Mexico.
February 4th - US additional 10% tariff on China on top of existing levies came into effect. Chinese export controls on tungsten, tellurium, bismuth, molybdenum and indium took effect (no specific countries mentioned).
February 10th - Chinese tariffs against the US took effect (15% tariffs on US coal & LNG, 10% tariffs on US oil).
February 13th - Trump signed his plan for reciprocal tariffs, albeit delayed the implementation.
March 4th - Tariff pause on Mexico and Canada expired; Additional 10% tariffs on China went into effect on top of Feb 4th tariffs. Canada announced retaliatory tariffs over 21 days, Mexico said it will also respond with retaliatory tariffs.
March 5th - Trump allowed a one-month exemption on Mexico and Canada tariffs of US automakers following talks with Ford (F), General Motors (GM) and Stellantis (STLAM IM/STLAP FP)
March 6th - Trump postponed the initial 25% tariffs on several imports from Mexico and some imports from Canada for a month. In response, Canada suspended its second wave of retaliatory tariffs.
March 10th - China's retaliatory tariffs on certain US agricultural imports (15% on US chicken, wheat, corn, and cotton; 10% on US soybeans, sorghum, pork, beef, aquatic products, fruits, vegetables, and dairy products) went into effect; announced on March 4th in response to the extra 10% US tariff on top of Feb 4th tariffs.
March 11th - Trump threatened 50% tariffs on Canada, although he later backed down from this threat after Ontario's Premier announced they are suspending the 25% surcharge on exports of electricity. Trump separately suggested tariffs may go higher than 25% but did not specify which tariffs.
March 12th - 25% tariff on steel and aluminium imports came into effect, with "no exceptions or exemptions"; European Commission launched countermeasures on US imports while it is putting forward a package of new countermeasures.
April 1st - Completion of the US trade policy review.
April 2nd - US Liberation Day; Baseline Tariff on 10% announces + retaliatory tariffs for worst offenders.
April 3rd - Mexico President Sheinbaum says response to US tariffs will be on April 3rd. [TBC]
April 5th - Deadline for US-China TikTok deal; European Commission expected to finalised its proposed response to the US.
April 7th - EU trade ministers to meet in Luxembourg.
April 13th - EU countermeasures against 25% steel and aluminium tariff to be fully in place.
TBC - pharma and semiconductors tariffs.