US President Trump announced Reciprocal Tariffs on April 2, 2025. Here to discuss the effects on marjor markets.
When one country increase tariffs, it will cause less imports, higher goods price, and retalitory tariffs by counterparties. Hence less exports, less GDP, slower global trading activities, less global GDP.
Regarding each markets:
1.Interest Market: Since higher goods price and slower global trading activities, inflation may pick up in short term, but deflation may happen in mid-term due to slowing down economy.So Interest rate would be at higher level at near term and lower level at mid or long term.
2.Foreign Exchange Market: Since global trading activities and global economy is slowing down. Exports oriented countires would need to devaluat its currency to resize its net export shares. Import oriented countires' currency would appreciate due to devaluation of export oriented currencites, such as US dollar.
3.Commodity Market: Given less global demands and unchanged supply, commodities price would take a hit at near term, but will rebalanced in mid term and increase in long term.
4.Equity Market: Given slower global GDP and higher interest rate in short term, Equity Market would take a hit in short term, especially export oriented companies. But domestic oriented stocks may benefit from tariff barries.
5.Fixed Income Market: Given higher interest rate in short term and lower interest rate in mid term, the interest curve would be more inversed and short term bonds yields would be higher than long term bonds.
6.Real Eastate: Given higher short term interest rates and slower global GDP and potentially higher materal prices in import countires. Real Estates price may decrease slowly in short term and rebound when interest rates are lower and GDP growth restored.
7.Crypto currency. Given higher interest rates and potential decrease in equity market, crypyto currency would decease in short term and rebound with lower interest rates and higher stock market in mid term.
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