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S&P 500 futures tumbled 3%, suggesting investors expect deep losses when Wall Street opens on Thursday
Published : 03 Apr 2025, 09:58 AM
US President Donald Trump further escalated a trade war on Wednesday by announcing he would impose reciprocal tariffs to match duties put on US goods by other countries.
"It's our declaration of independence," Trump said at an event in the White House Rose Garden. "We will establish a minimum baseline tariff of 10%."
Rates for China would be set at 34%, while the European Union and Japan would face 20% and 24%, respectively.
S&P 500 futures EScv1 tumbled 3%, suggesting investors expect deep losses when Wall Street opens on Thursday. Other stocks markets around the world and Treasury yields US2YT=RR fell too, while China's yuan CNH= dropped to a seven-week low.
LYNN SONG, CHIEF ECONOMIST FOR GREATER CHINA, ING, HONG KONG
"The tariff hike was larger than what most market participants were expecting, so the initial market is likely going to be a continuation of risk off sentiment, reflecting weaker growth expectations on a macro level as well as the individually impacted companies on a micro level.
"However, lost in the initial panic are several key things to consider. First, the US has signalled that these reciprocal tariffs will mark a cap unless countries choose to retaliate, and they appear to be encouraging countries to come and negotiate to lower the rates. Second, a broad based global tariff means that substitution products are less available.
"It feels like this time around US importers could end up bearing more of the burden from tariffs rather than expecting exporters to make up for the gap by cutting margins.
RODRIGO CATRIL, SENIOR CURRENCY STRATEGIST, NATIONAL AUSTRALIA BANK, SYDNEY
"When you look at the tariff announcement, it's certainly bigger and larger than the base case for many, or most, so it's not surprising to see how the kiwi and the Aussie are the ones underperforming today, reflecting their pro-growth sensitivity, and of course an increase in tariffs does mean lower trade and lower global growth.
"For the euro, it's an interesting one in the sense that it's showing some resilience, and that's probably related to the fact that Europe appears to be more focused on supporting its economy from the impact from US tariffs, rather than looking to retaliate as a first initiative. So I think the market has liked that approach of calmness and measuredness from Europe."
WANG ZHUO, PARTNER, ZHOUZHU INVESTMENT, SHANGHAI
"Trump's new tariff measures are undoubtedly unwise, as fair trade is not realised through so-called reciprocal taxes, but is determined by comparative advantage.
"The higher tariffs will dent US efforts to reduce inflation, so it's possible the US will witness stagflation. The slump in US stocks is a sign that investors are voting with their feet.
"The Chinese market is fully prepared psychologically, so is resilient. What's more import for China now, is to pay attention to domestic macro policies and data, and see when our CPI data can improve and whether it's sustainable."
NIGEL GREEN, CEO, DEVERE GROUP, DUBAI, UAE
“This is how you sabotage the world's economic engine while claiming to supercharge it. It's a seismic day for global trade.
"Tariffs are taxes, plain and simple, and American consumers will bear the brunt. When businesses don’t know what trade will look like next quarter, they stop hiring, stop investing, and freeze plans. That ripples through to consumers. This chilling effect is how recessions begin.
"The dollar’s dominance is also no longer a sure thing. America’s credibility is on the line. With the dollar as the global reserve currency, any whiff of unpredictability or politicized policy makes global investors nervous. That trust is hard-earned and easily lost.”
SCOTT WREN, SENIOR GLOBAL MARKET STRATEGIST, WELLS FARGO INVESTMENT INSTITUTE, ST LOUIS, MISSOURI
"I am a little surprised that it's a little less than what we thought potentially.
"We’ve wanted to be invested in the US relative to international and that’s not going to change. We like large cap... Now we're also overweight midcaps… On this pullback here, our outlook is not wildly positive but it’s positive. So we're trying to gain some cyclical exposure here. We're not trying to hide. We don’t want to get defensive. We want to take advantage of stock pullbacks to buy stocks and play what we perceive to be a better second half.”
OLGA YANGOL, MANAGING DIRECTOR, HEAD OF EMERGING MARKETS RESEARCH AND STRATEGY, AMERICAS, CREDIT AGRICOLE CIB- AMERICAS, NEW YORK
"The baseline tariff number, I don't think, should be a surprise to the market. We have to cycle through the individual countries and the impact on them all.
"It seems that, at least on the surface, that Brazil is getting off fairly easy ... With Mexico it's not fully clear, what will really matter is whether those USMCA exclusions are actually being extended. We are underweight MXN, our overall directional view on the dollar versus (emerging markets) is neutral, maybe slightly defensive."
OLGA BITEL, GLOBAL STRATEGIST, WILLIAM BLAIR & CO, CHICAGO
"Now the question is whether US exceptionalism is about to change and if so, where that leadership will migrate to. There are plenty of places in the world with the capacity and the will to respond (to the tariffs) and those places will respond.
"I don’t think we’re in for a period of stability or clarity, rather, I see this as an opening salvo and I expect to see a lot of back and forth. Hanging over all of this is the question of whether or not the US has the capacity to implement these tariffs, given that there are different rates on different products from different countries.”
ERIC M CLARK, CHIEF INVESTMENT OFFICER, ALPHA BRANDS PORTFOLIO MANAGER, SAN DIEGO, CALIFORNIA
"These tariffs will surely push consumers in China and other countries to consume more of their own products or other brands. This is a very dangerous game because when consumers are forced to change, most of the time they get used to the new products and never go back.
"We are pushing nationalism further in these local markets. Between the tone of how Trump talks about other countries and leaders and the nationalism that will come, he’s decided to take a isolationist approach, when the S&P 500 companies have more than 40% of revenues from outside the US This raises the risk of recession here even higher.
"I still expect that this self-created chaos is designed to create panic, and the uncertainty drives yields down at the time when demand for our debt is high, allowing us to refinance about $4 trillion to $5 trillion at much better rates. Then, over the next month or two, mysteriously the tariff deals start getting walked back and we get more certainty allowing the stock market to rally significantly."
JEANETTE GERRATTY, CHIEF ECONOMIST, ROBERTSON STEPHENS, MENLO PARK, CALIFORNIA
“The tariffs are so comprehensive and so much larger than we expected. People were talking earlier about whether clarity would boost the market. But now you have clarity, and no one likes what they see.
"The bottom line is that anything that anyone says today does not qualify as analysis, but there’s no question that speculation on whether this will slow growth and raise prices is no speculation: that is what will happen.”
MICHAEL MULLANEY, DIRECTOR OF GLOBAL MARKETS RESEARCH, BOSTON PARTNERS, BOSTON
“We have some detail now, this clarity. But once you actually dig into the numbers, the clarity is not as friendly as a 10% baseline would lead you to believe.
“It means that we're most likely going to see continued erosion in S&P 500 earnings per share expectations for 2025 and probably spilling over into 2026.”
SARAH KETTERER, CEO, CAUSEWAY CAPITAL MANAGEMENT, LOS ANGELES
“This is a salvo, this isn’t the final list ... it’s just another in what will be many rounds of negotiations.
"Market weakness globally should give you an opportunity to own global equity markets... European spending will be enormous and pivotal, and very stimulative especially if it’s combined with more bank lending. It’s not ‘Happy Days,’, but it does give global equities an opening to outperform, especially European equities that have lagged US stocks for the last 17 years. We think some of that gap will be closed.”
JOHN HARDY, CHIEF MACRO STRATEGIST, SAXO BANK, COPENHAGEN
“This is pretty negative relative to expectations... it makes sense to see the market reaction.
"Safe haven trades in the wake of the announcement will include the Japanese yen most definitely, repatriation of capital, into Japan, falling US rates, definitely. So Treasuries can be a safe haven, especially at the short end of the yield curve, I think would be the two chief trades. But even the longer-term Treasuries could do well.
"If Republicans keep banging on about tax cuts, I wonder if that's (longer-term Treasuries) a good bet. But for now, it seems the direction is clear. So the safest of safe just for parking things, gold, and especially short-dated US Treasuries, and then maybe a wild card there for longer-term stuff as well.”
JASON BRITTON, CHIEF INVESTMENT OFFICER, REFLECTION ASSET MANAGEMENT, CHARLESTON, SOUTH CAROLINA
“I see this as net positive. For the most part, these tariff levels are just the starting point for further negotiations. And Mexico and Canada are still exempt from further tariffs. I think the market will settle down and begin to parse the details and realize it’s at worst a mixed bag of news."
"I’m looking at the big technology companies that are sitting on enormous piles of cash. If they’re going to get pinched by this retreat, I’m a buyer on weakness. It’s just the market over-reacting, and I’m very happy to take advantage of that.”
