Although Thursday was expected to be a significant day for US reciprocal tariffs, the global equity markets showed little reaction, and the US dollar remained slightly weaker. The muted market response can be attributed to the complex nature of the tariff measures, which won’t take effect until after April, leaving ample time for negotiations.
Today, the dollar is softer in Europe due to a combination of lower US interest rates, ongoing hope for resolution in Ukraine, and the convoluted nature of the announced tariff package. The market was bracing for the Commerce Department’s major trade report scheduled for April and had anticipated potential tariffs afterward. However, the situation has shifted, with yesterday’s news easing immediate concerns.
Investors appear to understand President Trump’s goals with these tariffs, although the intricate calculations for each country’s tariffs are bewildering. The Commerce Department has been tasked with compiling a detailed report by April, but the feasibility of this, given workforce reductions, is uncertain.
We anticipate significant tariffs against major US trade deficit countries, particularly the EU. Meanwhile, the dollar may consolidate as focus shifts to upcoming discussions on Ukraine’s ceasefire, potentially leading to a short-term dip in the US Dollar Index. In the eurozone, current corrections in the EUR/USD may reach 1.0535/75 before stabilizing, despite anticipated growth pressing towards 1.00 in the second quarter.
