Please see the below article from Brooks Macdonald detailing their discussions on Trump Tariffs and the ongoing impact this continues to have on markets. Received this morning 11/04/2025.
What has happened
Equity markets continued their recent bout of volatility yesterday, with the US S&P500 equity index only narrowly missing out on extending its 5-day run of intraday moves of more than 5%. The US S&P500 equity index on Thursday moved in an intraday range of 4.65% between the day’s low and high. That intraday range is still huge, but it reflects just how uncertain markets are currently that the move was less than half of the intraday range that we saw the day before on Wednesday. One catalyst for market gyrations yesterday was the US clarifying even higher tariffs on China, with that news overshadowing a welcome lower-than-expected US annual consumer inflation print of +2.4% for March.
A tariff clarification
The US White House issued a memo yesterday to clarify that tariffs on China were actually at 145%, not 125%. The 20-percentage-point hike was, the White House clarified, because the US President Trump administration was adding on top of the latest reciprocal 125% tariff rate, the 20% tariffs imposed from earlier this year related to Beijing’s alleged role in the production and supply of fentanyl into the US. With renewed fears of a disorderly economic decoupling between the world’s two biggest economies, it sent the US S&P500 equity index down -3.46%. European equity markets might have looked better yesterday (with the pan-European STOXX600 equity index up +3.70%), but that is only because Europe was playing catch-up with an even better US evening trading session the day before (all in local currency price return terms).
Are US Treasury government bond markets still in charge?
Since Trump’s 2 April reciprocal tariff ‘Liberation Day’, we have seen US equities, US bond markets and the US dollar all under pressure. While there might be technicals at play, and some news reports have suggested the recent moves are in part down to hedge-funds unwinding leveraged positions, the risk is that if this continues this could collectively resemble capital flight out of the US – as a case in point, it is notable that US 30-year Treasury yields are currently on course for their biggest weekly rise since the 1980s. The US Treasury market has long-been considered the ultimate safe-haven asset off which everything else is priced – so when earlier this week US government bond prices fell alongside weak demand for a Treasury 3-year bond auction, one theory is that it was this that triggered Trump’s rapid U-turn, and his partial tariff 90-day pause.
What does Brooks Macdonald think
At this point in the US-China trade war, any further hike in tariffs is meaningless – with US tariffs on China at 145%, and China tariffs on the US at 84%, at those rates it effectively amounts to a double-sided trade embargo in all but name. The hope in markets is that Trump, just like he did with other tariffs earlier this week, might walk-back the tensions with a ‘pause’ on US-China’s trade war too. If US Treasury government bond markets push back against Trump’s plans as they appear to have done earlier this week, a Trump ‘blink’ might well come sooner rather than later.
Bloomberg as at 11/04/2025. TR denotes Net Total Return.
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Alex Clare
11/04/2025