President Trump's recent promise to implement reciprocal tariffs has stirred uncertainty in global markets, leading to a sharp decline in major indices like Hang Seng, Nifty, and ASX200. The announcement has particularly affected countries with high import tariffs, such as India, which faces a 14% tariff rate, making it a prime target for potential U.S. tariff actions. Meanwhile, European trade opened on an indecisive note as markets remained jittery over looming tariff concerns.
The currency markets have not been immune to the turbulence. The EUR/USD pair is trading in a narrow range near 1.0300, reflecting the market's cautious stance amid the ongoing trade uncertainties. Similarly, the GBP/USD is trading negatively around 1.2350, exacerbated by the UK's imposition of tariffs on steel imports. This development presents a challenge for political leaders Starmer and Reeves, as the Prime Minister expresses a preference for dialogue rather than a trade war with key trade partners.
In response to Trump's decision to raise import duties on steel and aluminum to 25%, markets are adopting a cautious approach. The focus remains on regions such as South America—namely Argentina, Brazil, and Mexico—and Asia, including India, Korea, China, and Indonesia, where tariff rates are already elevated. These developments come as a blow to global trade stability and have prompted strategic adjustments across various sectors.
Commodity markets are also reacting to the evolving situation. Gold has seen a downward correction from its record-high of $2,942 as investors engage in intraday profit-taking amidst modest USD strength. On the other hand, crude oil prices are witnessing an uptick today after experiencing a period of weakness since President Trump assumed office.
Traders and analysts are keenly awaiting Fed Chairman Powell's testimony, anticipated to be a pivotal moment for understanding future monetary policy directions. The market's response will likely hinge on Powell's insights into economic conditions and potential adjustments to the Federal Reserve's policy stance.