U.S. President Donald Trump’s recent announcement regarding tariff increases has sent ripples through global markets, raising concerns of potential economic impacts not seen since the early 20th century. The new round of tariffs, if implemented, would raise U.S. average tariff rates dramatically, raising the ire of all business markets and free-market thinkers. On Thursday morning, the Dow Jones Industrial Average jumped by 235.36 points, or 0.56%, settling at 42,225.32. At the same time, the Japanese yen surged against the USD.
The implications of Trump’s tariff strategy extend beyond U.S. borders, particularly affecting China’s economy. Beginning April 9, China will face a massive net tariff of 54% on their exports to the U.S. This new reciprocal rate comes in addition to existing tariffs, which together with the new reciprocal rate total 20%. The White House made the announcement official to CNBC’s Eamon Javers. They further stressed that these reciprocal rates are just one piece of the overall tariff picture.
Following the new tariff announcements, the Caixin/S&P Global services purchasing managers’ index (PMI) for China signaled the greatest increase in services business activity in three months. It did inch up from 51.4 in February to 51.9 in March. This further sign of a pickup in Chinese business activity and new orders points to continued positive momentum in China’s relatively robust service sector.
Hong Kong’s Hang Seng Tech Index fell by 2.3%. Markets tanked as investors overshot due to the lack of clarity on trade relations. So far, the Nikkei 225 in Japan is one of the worst hit. Its loss so far this year has been 10.45%.
In addition, market analysts have sounded the alarm about the long-term effects of these tariffs on both inflation and economic stability. J.P. Morgan Asset Management noted that “if these tariffs persist, they could materially impact inflation, as U.S. manufacturing struggles to ramp up capacity and supply chains pass on costs to consumers.” In particular, they focused on the fact that the proposed changes could greatly raise U.S. average tariff rates. These levels are the highest they’ve been since the early 20th century.
As financial markets around the world keep responding, gold prices have spiked with rising trade tensions and geopolitical fears. Lee Ying Shan commented on this trend, stating, “Gold remains boosted by escalating trade uncertainties, heightened geopolitical tensions, a weaker U.S. dollar, increasing central bank purchases, and rising risks of recession.”
The yield on the 10-year U.S. Treasury note recently reached its lowest point in nearly a month, falling to 2.085%. This drop demonstrates that investors are becoming risk averse due to mixed signals from the economy. On the commodity markets, global benchmark Brent crude oil prices were down 2.82%, settling at $72.86 per barrel. U.S. West Texas Intermediate futures fell 2.89%, to $69.67/bbl.
Both the Australian dollar and Korean won fell 0.49% and 0.19% against the dollar, respectively. The Australian dollar was 0.6265 while Korean won was at 1465.89 per US dollar.
For the typical American household, the financial impact from these tariffs would be harsh. Stephen Dover warned that “the average American family may pay up to an estimated $4,200 more per year because of today’s tariffs,” assuming an average tariff rate of 20% on imports. He further stated that such tariffs “will likely slow household and business spending, thereby increasing the risk of U.S. growth and earnings disappointments in 2025.”
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