...ok I will continue but the message is clear, if you interrupt, there will be interruptions to my posts.
...please note that those scathing remarks that I posted were sentiments shared by third parties on Twitter, which I also shared.
This morning we saw whipsaw in equity and currency markets moments after Trump's tariff speech and after those new rates were announced.
...the manner in which the new tariff rates were determined is not clear, but it seems it took in consideration other non tariff aspects as well such as VAT, trade barriers.
....as you can see in the Table below, the tariffs were pretty large including 34% on China and 20% on EU and while 10% on our Australian products is not welcomed, it could have been worse.
IMPORTANT detail from the White House about some commodity and energy imports, which are (on a first and quick read) ***excluded*** from the reciprocal tariffs: https://x.com/JavierBlas/status/1907546318433558718
One big point amid all the headlines: I was texting with press secretary Karoline Leavitt during the event and she confirms that the 34 percent tariff on China is ON TOP of the previous 20 percent. So that means the rate on China will be *54* percent when these tariffs take effect. https://x.com/EamonJavers/status/1907540655871521264
This above should be Australia's main concern- a big tariff hit on China could reduce demand for our commodities.
Treasury Secretary Scott Bessent just said on Bloomberg that the 34% China reciprocal tariff will be added to their 20% fentanyl tariff for a combined 54%. Walmart is bidless after hours. No Wall Street analyst came anywhere close to predicting this level of fiasco. This is U.S. Brexit https://x.com/SuburbanDrone/status/1907547624414036396
..OMG! Mac10 said exactly as I did - this is US Brexit !
Clearly while Trump 2.0 indicates that they were not looking at those rates as being negotiable, they would be.
With tariffs to apply from April 5, there are three certainties despite all the good intentions that Trump 2.0 may have for his country.
1. Almost assuredly China and EU at least would retaliate with responses that may be outside of tariffs. China had already announced restrictions on their companies to invest in the US. EU had intimated applying regulatory costs (perhaps a digital tax) on the mega techs (which could affect Meta, Google, Apple, Amazon) and Tesla would be the low hanging fruit for them (Poland Govt official called for boycott). So in the weeks and months ahead, these tit-for-tat and negotiations would be creating an atmosphere of continued uncertainty for economy and markets as well as business investments. Anything but good. And to expect extreme volatility both ways.
2. Almost immediately from April, many imported products in America would see a jump in prices, as higher tariffs on imports would be passed onto consumers. This is an immediate 'tax' on American consumers, just a question of degree, as businesses can't afford to absorb them. A higher inflation reading would be ahead, so that would make the Fed's work a lot harder. I watched an American businessman in the industrial sector who said he had no choice but to buy an imported Chinese machinery that is like 1/2 the price of an American made which does the work just as well, and even any tariffs would not be enough to make him consider the switch. Those who followed my EV thread would know how important economies of scale is in reducing production costs. In the case of US, many American manufacturers had been facing lower production volumes (that were dwindling) over the years so they could never compete on price but on quality. So with the tariffs coming into effect immediately, there won't be enough time for local producers to be in any position to produce more to bring prices lower, instead arguably they could seize this opportunity to also raise local prices slightly as the price differential narrowed due to the tariffs.
3. Many Americans live on and buy cheaper imported products. They can't just switch to local made because many products are not even locally produced anymore (following globalisation), hence they would have to pay more for those goods with no other options. For cash strapped consumers, it would inevitably lead to lower demand. Lower demand would fuel the existing deflationary forces, possible enough to lead to an economic contraction as consumption, investment and exports all get hit.
In other words, the risk of stagflation could not be higher now.
US markets put on a brave front, rising to close higher with Dow +0.56%, S&P500 +0.67% to 5,670 and Nasdaq +0.87% to 17.601 but in after hours following Trump's 'liberation day' address on tariffs, all major indices are crashing as I write: Dow -726pts, S&P500 just broke the all important 5,500 handle , -3.16% to 5487!
BREAKING: TRUMP IS LIBERATING US FROM CAPITAL GAINS TAXES
