No Positive Reciprocation From Markets

Daily Updates:

• President Donald Trump finally announced his reciprocal tariff plans after weeks of back and forth on how the “Liberation Day” tariffs would be imposed, imposing the largest tariffs seen in America since the 1930s.
• Trump announced that the US will apply a baseline 10% tariff on all exporters to the country, with customised duties on top of that baseline to around 60 different nations who have trade imbalances with the US. 
• The President’s administration has calculated the reciprocal tariffs by comparing a country’s trade surplus with the US relative to the sum of that nation’s exports to the US and divided that number by two. In the case of China, who had a $295B surplus with the US, relative to $438B of exports, the ratio comes to 68% and in turn the US will impose reciprocal tariffs of 34%. However, in China’s case, that 34% will be added on top of the already imposed 20% duties tied to fentanyl trafficking, meaning tariffs on Chinese imports will be above 50%, and close to the 60% the President initially campaigned on.

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• The 10% baseline charge will be in effect from April 5, but for countries that face customised higher duties, those duties will replace the 10% baseline — rather than add on top of it — and are due to start on April 9. 
• According to Bloomberg Economics, the effective tax rate the US now charges on more than $3T of imported goods may climb to around 23% — the highest in any point of time in over a century.
• Canada and Mexico so far appear to be exempted from the reciprocal tariffs and instead subject to the previously announced tariffs: 25% across-the-board on all goods not covered by the USMCA agreement. Additionally, certain goods from key industries such as steel, aluminum, automobiles, copper, pharmaceuticals, semiconductors, and lumber are also exempt from the reciprocal rates and are likely to be subject to their own rates.

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• Trump’s Treasury Secretary, Scott Bessent, stated that he suggests countries shouldn’t “try to retaliate” and that “as long as you don’t retaliate, this is the high end of the number”. Trump also indicated a willingness to negotiate and lower those tariffs, saying to foreign leaders “terminate your own tariffs, drop your barriers” and “don’t manipulate your currencies”.
• It may be a little too late for that however: European Commission President Ursula von der Leyen has said the EU is “preparing for further countermeasures” and a separate spokeswoman for the EU has said it may retaliate by the end of April with taxes on US technology companies and that the bloc “are ready for this trade war”. 

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• During the announcement, the President stated that “these tariffs will give us growth like you haven’t seen before”, but it is fair to say financial markets across the globe have not reciprocated that sentiment. US equity futures had fallen as much as 4% as Trump began listing the tariffs nation by nation. That was a complete reversal from an initial move up in futures when according to various news outlets it was being speculated the tariffs would only be the 10% baseline and nothing more. 
• BTC very much moved in the same direction – initially rallying from $86K close to $88K before subsequently falling to $82K as Asian equity markets opened. We have often seen that $82K level act as a lower bound for BTC spot price, which it only fell through during the March 11 local bottom.
• ETH mirrored a similar move, falling from $1,900 down to $1,785 and now currently trading slightly above $1,800. XRP and SOL have fared the worst amongst the top 4 with SOL currently down 5% on the day. 
• BTC’s term structure is almost dutifully inverted, though as we have observed in the past few inversions, front-end vol levels quickly dropped off again, returning back to a flat curve. Again, that is contrasted with ETH which has inverted slightly further. 
• Short-tenor skews have once again crashed down towards puts, with demand lop-sided towards further protection against downward moves. For BTC, only tenors above 4 months hold a premium towards calls. 
• On the other hand, gold rallied to another new all-time high reaching levels of $3,160/ oz, with bullion now up over 19% year-to-date. US 10-year treasury yields also fell shy of 4%, their lowest levels since October 2024.

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