3rd April 2025

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TRADE:

• US President Trump announced a new baseline 10% U.S. tariff on goods from all countries from April 5th and higher reciprocal tariff rates for certain countries from April 9th. The EU will be hit with a 20% tariff rate, with 46% for Vietnam, 24% for Japan, 25% for South Korea, 26% for India, 32% for Taiwan, and 36% for Thailand. (RTRS)
• China has a cumulative 54% tariff (34% + 20% fentanyl tariffs). Trump separately signed an executive order that permanently ends the duty-free "de minimis" exemption for packages from China and Hong Kong, a loophole exploited by Shein and PDD Holdings' Temu. (RTRS)
• Goods from Canada and Mexico are not currently subject to reciprocal tariffs because Trump's prior 25% fentanyl-related duties remain in place on their goods, along with 10% for Canadian energy and potash. However, exemption for goods compliant with the USMCA on trade will continue indefinitely after Trump had previously said the exemption would expire. (RTRS)
• Imports that are subject to separate 25% tariffs will be excluded, including autos and auto parts, steel and aluminum. This exemption extends to other sectors including copper, lumber, semiconductors, and pharmaceuticals. A forthcoming annex will also enumerate other exempted products, including certain critical minerals, energy and energy products. (RTRS)
• The White House’s new tariffs announced Wednesday were pegged to amounts it said other countries impose on the U.S. In many cases, those amounts appear to match a basic formula: the size of a country's goods-trade imbalance with the U.S., divided by how much America imports from that nation. (WSJ)
• US Treasury Secretary Bessent urged other countries to not retaliate against the US measures. "Let's see where this goes, because if you retaliate, that's how we get escalation," he told CNN in an interview on Wednesday night. (CNN)
• U.S. Council of Economic Advisers Chair Stephen Miran said that there will be short-term bumps caused by tariffs announced by Washington. (FBN)
• Fed's Kugler (voter) said rising tariffs in the US could feed into more prolonged inflation than might be expected, pushing back on views that prices would only rise on imported goods. (RTRS)
• A handful of Republican senators broke with President Trump on trade policy, joining with Democrats to pass a resolution aiming to undo the president’s 25% tariff on Canadian imports. However, Trump can veto the effort, making it nothing more than symbolic. (WSJ)
• Morgan Stanley have scrapped their call for a June Fed cut after the tariff announcement as a result of "tariff-induced inflation", sees the FOMC on hold until next March. (@MrMBrown)
• JPM suggest the average US effective tariff rate is now 23% vs. 10% before Trump's announcement, sees tariffs raising $400bln on a *static basis*, boosting PCE by 1-1.5% this year mainly in Q2 & 3, which "could take the economy perilously close to recession". (@MrMBrown)
• Piper Sandler analysts expect the tariffs will add 2.6 percentage points to US inflation, and believe the economy will shrink at an annualized pace of minus 1% over the next three months. (WSJ)
• UBS suggests if the full set of proposed tariffs were made permanent, US inflation could rise to around 5%. (Newswires)
• China urged the US to immediately cancel its latest tariffs and vowed countermeasures to safeguard its own interests. The US move disregards the balance of interests reached in multilateral trade negotiations over the years and the fact that it has long benefited greatly from international trade, the Chinese Commerce Ministry said. (RTRS)
• EU’s Von Der Leyen Vows Response to Trump’s 20% Tariffs. The EU chief said the bloc is ready to respond, calling tariffs “a major blow to the world economy.” Von der Leyen said, “Uncertainty will spiral and trigger the rise of further protectionism. The consequences will be dire”. (WSJ)
• EU Council President Costa said the trade tariffs imposed by the US should urge Europe to reach free trade deals with other partners in the world. (RTRS)
• France, working along with the EU, is likely to issue reciprocal responses to Trump's tariff measures on the EU initially in mid-April and then again in late April, said France's goverment spokeswoman. She reaffirmed that digital services could be targeted. (RTRS)
• German Finance Minister on BBC Radio said discussions are ongoing despite US tariff announcement, saying no one closed the door on trade negotiations with the US. However, he said it would be naive to think things will get better if we just let this happen and the EU needs a strong response. (Newswires)
• Far-reaching tariffs announced by the U.S. administration will deal a major blow to the German industry, leading sector representatives said. (RTRS)
• Canadian PM Carney said Canada would respond to US tariffs imposed by Trump on many Canadian goods, the auto sector and steel and aluminum with “countermeasures,” and would have more to say Thursday after meeting with the leaders of Canada’s provinces. (WSJ)
• Japan PM Ishiba described U.S. tariffs as “extremely unfortunate”, saying Japan will continue to demand the US reconsider. He indicated a willingness to directly approach Trump if appropriate. Ishiba pledged to respond thoroughly to tariff concerns raised by small businesses and said he will instruct relevant ministers this afternoon regarding responses to the tariffs. (RTRS)
• South Korea's acting President Han Duck-soo called on Thursday for talks with U.S. officials to shield the export-reliant economy from the impact of U.S. tariffs (25%) and ordered emergency support measures for businesses. KOSPI index drops 2.7%, automakers and chipmakers hit. (RTRS)
• South Korea said it will provide "emergency support measures" for industries, such as automobiles, that are bracing for the U.S. tariffs announced by President Trump Wednesday. (WSJ)
• Vietnam (46% tariffs), Thailand (36% tariffs) suffer most as US tariffs shake Asian markets. Vietnam's dong hits record low, stocks drop over 5%. Thai baht weakens to 2-1/2-month low. (RTRS)
• Thailand will negotiate with the US on tariffs, PM Shinawatra said, "We won't let it get to where GDP will miss the target," she said. (RTRS)
• Vietnam's PM Pham Minh Chinh said he would set up a task force to deal with the situation and said the tariffs did not reflect the good relations between the two countries, state broadcaster Vietnam Television said. (RTRS)
• Australian (10% tariff) PM Albanese ruled out imposing reciprocal tariffs on US goods, saying he wants to avoid a race to the bottom that he said would lead to higher prices and slower growth. (WSJ)

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MACRO:

• Senate Republicans rallied behind a fiscal framework that allows more than $5 trillion in tax cuts over a decade, taking a crucial step toward turning President Trump’s agenda—tax cuts, border security and national defense—into law. (WSJ)
• Trump's approval rating fell to 43%, the lowest since his return to office, as Americans soured on his tariff moves and his administration's handling of information about a military strike in Yemen, a Reuters/Ipsos poll found. (RTRS)
• Money markets are ramping their rate cut projections across major central banks as growth outlooks overcloud the inflationary impulse from tariffs. GBP OIS curve pricing 58bp cuts this year (vs 53bp yday), EUR OIS at 69bp (vs 60bp yday), USD OIS at 80bp (vs 76bp yday). (@MrMBrown)
• China’s services-sector activity expanded at a faster pace in March, thanks to improving demand boosted by government stimulus measures, according to the Caixin services PMI. (WSJ)
• China's central bank set the official yuan mid-point rate at 7.1889% on Thursday, the weakest level since January 17th. (RTRS)
• Foreigners sold Japanese stocks for the ninth straight week through March 29, the longest selling run in three years, amid concerns that U.S. reciprocal tariffs could disrupt exports. (RTRS)
• Japanese government bond purchases by individuals rose 32% to 4.49 trillion yen ($30 billion) in fiscal 2024, as people sought to take advantage of the Bank of Japan's policy shift to raising rates. (Nikkei)
• Japan's service industry stagnated in March while broader private sector activity contracted at the fastest pace in more than two years, the au Jibun Bank Japan Services Business Activity Index showed. (RTRS)
• Swiss inflation came in soft, with consumer prices rising 0.3% from a year ago in March (exp. +0.5%) and unchanged compared with the previous month (exp. +0.1%), the Federal Statistics Office said on Thursday.

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GEOPOLITICAL:

• Europe’s top diplomats and defence officials will huddle in separate gatherings Thursday to sketch out how to increase the continent’s defence capabilities, in the face of a revanchist Russia and capricious US. (FT)
• Many Germans are in “denial” about the dangers of Russian aggression, an ally of chancellor-in-waiting Friedrich Merz has warned, as he said that the next government must make the scale of the threat clear to the public. (FT)

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EQUITIES:

• Apple (AAPL) could take a 9% hit to its gross margins if it can’t pass on the full cost of Trump’s new tariffs given the majority of its manufacturing in China. (Investing)
• Amazon will begin deploying its satellite broadband constellation, Project Kuiper, this month in what is expected to become the first serious challenge to the dominance of Elon Musk’s Starlink. (FT)
• Micron has recently passed NVIDIA’s qualification test for its 12-high HBM3E and is set to begin full-scale mass production, according to reports from Korean media. (Sisa via @Jukanlosreve)
• Rolls-Royce is in talks with the British government about taxpayer support to help fund the £3bn development of an engine to power the next generation narrow-body aircraft, primarily used for short-haul flights. (FT)
• BP will announce that production has started on a new gas field in Trinidad. (FT)
• Volkswagen will add an “import fee” to the stickers on its cars that are affected by the 25% vehicle tariff, the German automaker told its dealers. (WSJ)
• Siemens said it will acquire U.S.-based Dotmatics for $5.1 billion from private equity firm Insight Partners to strengthen its Life Sciences portfolio. (RTRS)
• Samsung has turned to Chinese technology groups to prop up its ailing semiconductor division, as it struggles to secure big US customers despite investing tens of billions of dollars in its American manufacturing facilities. (FT)
• Japanese trading house Mitsubishi Corp may consider investing in the Alaska LNG project in the United States, Chief Executive Katsuya Nakanishi said on Thursday. (RTRS)

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