Although President Trump has been threatening to increase tariffs for months and has been talking about yesterday’s “Liberation Day” round of new tariffs for weeks, which included a 10% baseline tariff plus reciprocal tariffs against pretty much everyone except for Canada and Mexico, some people still appear to have been caught off guard.
Stocks and commodities have been in free fall overnight on the tariff news. Historically, investors have feared tariffs because of their historically negative impact on world trade and the global economy. US index futures are getting crushed today with Dow Futures down 2.6%, S&P Futures down 3.1% and NASDAQ futures down 3.6%. Major overseas markets are red across the board including losses of 2.0% for the Dax, 2.8% for the CAC, 1.5% for the FTSE, 2.7% for the Nikkei and 1.5% for the Hang Seng.
The tariff announcement has also had a big impact on other asset classes overnight. US bonds are rallying, pushing down treasury yields with the 10-year falling below 4.10%, to its lowest level since October. The US Dollar is getting hammered against other paper currencies. Against the greenback, the Euro and Yen are both up 2.1%, the Pound is up 1.3% and the Loonie is up 1.0%. Considering the “risk-off” nature of today, it’s no surprise that Bitcoin is down 4.1%.
What is surprising is that precious metals are also taking a hit with Gold down 1.8% and Silver down 6.4%. They had rallied in recent weeks on tariff speculation, however, so this could be profit-taking against the news. Amid concerns tariffs could negatively impact the global economy and resource demand, commodities are falling today with Crude Oil dropping 6.0% and Copper falling 2.9%. The selloff in Oil appears to have been accelerated by the news that OPEC+ is going to reduce production cuts by 0.4 mmbbls a day starting in May.
It’s not just tariffs potentially impacting the US economy either. With government spending cuts leading to cuts in government payrolls, Challenger layoffs jumped to 275K last month from 172K in January. This was the largest month for US layoffs since the pandemic in 2020. We may get more of an idea on US employment tomorrow with Nonfarm Payrolls (street 140K) on the way, along with Canada employment (street 12K).
The threat of tariffs already seems to have been having an impact on trade. This morning the US announced a $122.7B trade balance which was an improvement from a $130.7B deficit last month. Canada reported a surprise trade deficit of $1.5B, a surplus of $3.4B had been widely anticipated.