United States President Donald Trump is on the verge of announcing a new round of tariffs this week, likely triggering massive economic repercussions. The upcoming announcement, most likely midweek, comes against a complex backdrop of economic uncertainty and intensifying speculation. As further rumors and possible counter-measures fly around, these moves are sure to be front page news and move markets based on perceptions.
The economic picture is still very fluid with this week a loaded one. The biggest of these key data points may be the Nonfarm Payrolls (NFP) report for March. In fact, in the expert world, it’s widely considered a key indicator of economic vitality. These changes represent one of the biggest impacts on the trade-weighted average tariff rate on everything the US imports. This is a large uptick of about 5.5 to 6.0 percentage points. This magnitude of tariffs is nearing historical apogee, only rivaled since the post-World War II era.
The ramifications of these tariff changes are enormous. His tariffs have raised inflationary pressures even as they stifled economic growth. Normally businesses would have had years to adapt to this changes. As time goes on, the impact of the tariffs will start to wear off as existing trade routes get diverted. This may push them into a downward economic spiral.
In international financial markets, US economic problems have put downward pressure on US Treasury bond yields. At the same time, the XAU/USD has been on a bullish trend as investors flock to safe-haven assets due to growing uncertainties. In the meantime, Gold prices have continued their upside trajectory, rallying above $3,150 at the time of writing on Monday afternoon. At the beginning of the week, GBP/USD traded tightly within a range of +/- 50 pips around the 1.2950 level. This move better shows the risk-averse mood among traders.
The risk mood is set to stay fairly lukewarm as worries that Trump’s tariffs will remain a significant dampener on mood. In fact, current tariff levels are approaching historical highs. Market participants are still working to understand any new announcements and what they could mean. As trade policy starts to change, businesses and investors across sectors and borders are waiting to see if new global economic realities take shape.