Monday was a very choppy session with assets seeing two-way trade. Stocks and yields gapped lower at the start of APAC trade, with US President Trump showing no signs of easing up on his aggressive approach to trade. However, some countries are aiming for deals with the US to reduce tariffs, although WH Trade Adviser Navarro warned that non-tariff barriers are the issue. Meanwhile, US President Trump threatened an additional 50% tariff on China if they do not remove the 34% tit-for-tat tariff on the US by tomorrow. Note, stocks saw a brief, monumental spike higher while T-notes were slammed after CNBC reported that WH Economic Adviser Hassett said that US President Trump was mulling a 90% pause on tariffing all countries except China. However, this was misinterpreted by CNBC, and the White House were quick to deny the comment, calling it “fake news”. This saw markets reverse with stocks then tumbling and T-notes paring the earlier losses. In FX, the Dollar was ultimately bid while the Euro and Japanese were sold, but cyclical currencies underperformed, namely Sterling, Australian Dollar and New Zealand Dollar, with the latter two hit by Trump’s retaliation threats on China. The Swiss Franc outperformed due to its haven aspects. Gold prices continued to sell, falling sub-USD 3,000/oz with the tariff-fear premium on the yellow metal no longer there given bullion is exempt from tariffs. Crude prices tumbled in very volatile trade but settled over USD 1/bbl lower with a focus on fluid tariffs and the trade situation. US President Trump threatened an additional 50% tariff on China for their 34% tariff response to the US’s reciprocal tariff rate. The US President said if China does not remove these tariffs by tomorrow (April 8th), the US will impose the additional 50% tariff from April 9th – when reciprocal tariffs are set to take effect. Overnight, Trump echoed a strong approach to China, stating that unless they solve the deficit with China, he will not make a deal. He noted how they have massive deficits with China, the EU, and many others. Meanwhile, either fake news or a misinterpreted comment hit CNBC that the White House Economic Adviser, Hassett, stated Trump is considering a 90-day pause in tariffs for all nations, except China. However, this was swiftly denied by the White House as fake news. Hasset did note, however, that Taiwan reached out overnight on tariffs and that he has seen some great deals, but Trump will ultimately decide how great. Meanwhile, WH Trade Adviser Navaro spoke, noting how when Vietnam said they would lower tariff rates to zero, “it means nothing to us”. It is the non-tariff manipulation that they are focused on. Navarro added how Trump is seeking cuts to tariffs and non-tariff barriers, and that trade partners zeroing tariffs is the first start – he also called on the EU to drop non-tariff barriers, including VAT. The EU Commission reportedly proposed a 25% tariff on US goods to take effect from May 16th, according to Reuters citing a document. It also removes US bourbon from its list of goods to face counter-tariffs. It proposed counter-tariffs on some US imports to take effect from December 1st and also proposed counter-tariffs on a range of US imports at 25% in response to US steel duties. EU Trade Chief Sefcovic said the EU is to consider all options, but they have not seen engagement from the US, which would lead to a mutually acceptable solution. Note that Sefcovic was touting April 15th and May 15th as dates to implement tariffs. This followed commentary from EU’s Von der Leyen, who said the EU had offered a zero-for-zero tariff deal to avert a trade war with the US, noting they are ready to negotiate with the US on tariffs and are ready for a good deal but ready to take countermeasures. Elsewhere, Mexico’s President Sheinbaum said she wants to avoid putting reciprocal tariffs on the US. While the Vietnam PM is to address US concerns on non-tariff barriers. South Korea’s Trade Minister is to visit the US on Tuesday-Wednesday and will meet with US Trade Representative Greer and is to discuss lowering 25% US tariff rates. The Taiwan President said Taiwan does not seek retaliatory tariffs against the US and we’ll start talking about bilateral ‘zero tariffs’, adding to ensure Taiwan’s competitiveness, they will increase US imports and adopt other measures. Japan PM Ishiba said they will continue to ask the US to lower tariffs against Japan but likely won’t get results overnight. US officials state that over 50 countries have approached the US on trade talks. Meanwhile, Fed Member Kugler said tariffs and shortages are important to consider when forecasting what inflation will do. Kugler added new tariffs will be ‘consequential’ and have already started seeing some increase in prices. Further on tariffs, Kugler does not know how businesses will react, and how much of a tariff increase they will pass on to consumers. On inflation expectations, she stated they have moved up, mainly short-term expectations, and for now, long-run inflation expectations are well anchored. Regarding Q1, she added it may show more strength than they may imagine, but consumer confidence is moderating. Further on this, Kugler added there is a lot of uncertainty, and uncertainty is holding back business investment. Ahead, the Fed has to be careful in how to navigate, and that right now, inflation is more pressing. Elsewhere, Oil closed 2% lower while Gold was weak, ending Monday’s session with a 2.5% fall.
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