This is just the beginning of a new phase of mercantilism—on President Donald Trump’s orders, of course. He’ll do this by imposing a mind-boggling 104% tariff on some Chinese imports, starting April 9. This decision specifically goes after some of our most important trading partners such as Mexico, Canada, and China. It seeks to promote the American economy and assist US producers by placing tariffs. Combined, these countries made up 42 percent of total US imports in 2024.
The White House underscored the haste of this tariff approach during a press gaggle. In a withdrawn statement, the Press Secretary announced that the tariffs will start at noon Eastern time. This termination marks a welcome reaction to China’s continued intransigence in failing to withdraw its own retaliatory tariffs. The announcement has already started to affect the US Dollar, and markets worldwide.
The Rationale Behind Tariffs
Tariffs are a type of customs duties specifically placed on particular goods that are imported. Their stated goal is to protect sensitive domestic industries from harmful foreign competition. Trump’s administration seems to think that by putting in place some killer tariffs, it can bring US manufacturers roaring back and get us off these imports.
Proponents of such measures claim they are essential to preserving local employment and economic activity. On the other hand, others caution that they can increase costs for consumers and elicit countermeasures from trade partners. The complexity of this issue is indicative of the greater protectionism vs. free trade debate happening across the country right now.
Despite this, as these new tariffs are enacted, the markets have reacted with hesitation. The US Dollar has taken hits and rides due to uncertainty about what the US’s future trade relations will look like. Wall Street continued to rally after the tariff announcement, but it cut in half its early gains, a sign that investors are viewing the hype with cautious optimism.
Global Reactions to the Tariff Increase
Reactions from Beijing have come quickly and very strongly, especially given the announcement of the 104% tariff on Chinese goods as unbearable. China’s Commerce Ministry has promised to “fight to the end” against what it sees as unreasonable trade actions. This pronouncement highlights the risk of heightened confrontation as both countries try to manage the deepening enmity that now defines their bilateral economic ties.
“We will continue to take resolute and strong measures to safeguard our legitimate rights and interests.” – Chinese Foreign Ministry spokesperson Lin Jian
These developments have the eyes of the international community trained closely upon them. The effects of these tariffs stretch well past the US and China. Countries doing business with the two biggest economic powerhouses are sure to be impacted. That would have much broader economic consequences for them too.
Economic analysts have pointed out that many industries can perform well when they face less competition because of tariffs. They caution others will incur significant costs as a consequence. It seems retailers will be the ones hit with increasing costs. Otherwise, they will be forced to pass these costs along to consumers, meaning higher prices for imported products.
Market Implications and Future Outlook
As a recent Business Roundtable report indicates, the panic over tariffs is reeving down. Americans are starting to see these trade measures as less scary. This shift has enabled a modest recovery in global equities as investors reassess their strategies in light of new information. Nevertheless, risks are still tilted to the downside as market participants continue to process the ramifications of the new tariff structure.
Needless to say, the gold market has at times been the most sensitive to unexpected changes in economic policy and/or sentiment. Gold prices head south as they pierce their 20 SMA (Simple Moving Average). This change reflects a missed opportunity and lack of apparent strong directional conviction in these turbulent times. Today, investors the world over are asking whether gold still has a future. Will it lose its standing as a safe haven, or will it keep falling as other assets?