Market Wire: Markets Drop As Trump Announces Costly Tariff Increases

A series of violent dislocations is unfolding across financial markets after US President Trump announced an unexpectedly-severe salvo of tariff increases, touching off a full-blown, multi-front global trade war while leaving major uncertainties in place.

Saying that the United States had “been looted, pillaged, raped, and plundered by nations near and far, both friend and foe alike,” Trump said his administration would impose a 10-percent baseline tariff on imports from all countries, but would hit specific countries with significantly higher levies.

The president presented a cardboard chart illustrating the results of the ‘America First Trade Policy’ executive order investigations signed on Inauguration Day, and listing proposed tariff rates as laid out below*:

China: 34%

European Union: 20%

Vietnam: 46%

Taiwan: 32%

Japan: 24%

India: 26%

South Korea: 25%

Thailand: 36%

Switzerland: 31%

Indonesia: 32%

Malaysia: 24%

Cambodia: 49%

United Kingdom: 10%

Despite the risks to their own economies, major trading partners are highly likely to respond with tariffs and other countermeasures of their own, generating more turmoil in the weeks and months ahead.

It is unclear whether these tariffs will be applied on top of previously-announced levies, and although they are theoretically due to take effect as of midnight tonight, implementation will likely be delayed given that—to our knowledge—an official notice has not yet been added to the Federal Register.

Canada and Mexico were not specifically listed, suggesting that they are not included in the reciprocal tariff schedule. Administration personnel have reportedly clarified that an exemption for USMCA-compliant goods will remain in force, but fentanyl-related tariffs will stay in place on the two countries, and 25-percent duties set to apply to auto imports will proceed as planned. We have not seen official confirmation of this yet.

Equity futures are tumbling, Treasury yields are down, and the US dollar is advancing as we go to print. This suggests that market participants expect a number of target countries to suffer negative growth consequences, but also reflects concern that the American economy itself could slow as one of history’s largest and most regressive tax increases hits business investment and consumer spending. If the proposed tariff increases are not negotiated down, the odds of a US recession could ratchet higher, putting renewed pressure on US yields and rate differentials.

Bottom line: If businesses and market participants were hoping for a modicum of certainty to emerge from today’s press conference, they didn’t get it.

*Please note that these rates were taken from a screen capture during the press conference, and may prove inaccurate