April 1: The true tariff wildcard date?

Markets

Global markets are pushing higher as investors shrug off Trump’s tariffs—for now. The relief rally, sparked by the U.S. decision to pause aggressive levies on Canada and Mexico, is gaining traction. Let’s be honest—this was always more political than practical, a sledgehammer to crack a peanut, with risks far outweighing rewards.

Over in the Far East, the U.S.-China trade war entered its next phase as Beijing fired back following Washington’s 10% tariff implementation. But instead of launching a broad economic counterattack, China opted for precisely targeted retaliation—surgical strikes, not economic shockwaves. Beijing is clearly playing it carefully rather than going all-in. This aligns with China’s earlier olive branch—keeping the yuan stable—a move meant to keep negotiations alive rather than escalate tensions.

While the North American tariffs were essentially political theatre aimed at curbing illegal immigration and fentanyl trafficking, China’s position remains a fundamentally different challenge. The yawning trade gap between Beijing and Washington means that if China wants to strike a meaningful deal, it will likely have to bring more to the table—potentially including moves to accelerate peace talks with Russia.

Still, the bigger picture remains clear—China was always the main event. The real tariff wildcard date is April 1, when Trump expects a full trade review from his team. This could usher in a more calculated, sector-specific tariff rollout, potentially following the Bessent 2.5% gradual strategy, giving businesses time to adjust while keeping Trump’s campaign promises intact.

But don’t lose sight of the next major test—Europe. The EU is the real trade war litmus test, and unlike Canada or Mexico, Trump can’t frame it as a national security issue. If he imposes tariffs on Europe, it will be purely about trade surpluses.

As for why the market barely flinched at the China tariffs, the answer is simple—they aren’t economically destabilizing. Not to mention, U.S.-China trade has already been declining for years, so this round of tariffs doesn’t deliver the same gut-punch effect as before. But make no mistake—April 1 is the key date, and the situation remains fluid.

Even if the last few days have been high-stakes political theatre, it’s clear that the new administration is playing the long game, aiming to reshape global trade in America’s favour. Markets are adjusting, but the trade war storyline is far from over.

Forex markets

The Chinese renminbi—arguably the benchmark of the trade war risk—has rebounded and is now trading at 7.29 USDCNH, perched just below the key technical level of 7.30. That drop beneath the critical demarcation is exerting a magnetic pull on the G-10 and ASEAN currency markets, buoyed by a much-improved global growth outlook compared to the end of last week. Even though the 10% tariff hike took effect yesterday, the market is breathing a sigh of relief as broader risks appear contained.

This emerging scenario raises an intriguing question: are we witnessing a clear pattern in the evolving trade war dynamics? Recall that President Trump once threatened tariffs on Colombia, Canada, and Mexico, only to back down at the last minute, and the U.S.-China relationship now seems less incendiary than in past clashes. If these superpowers can find common ground, global capital markets would enjoy a far more stable environment.

Ultimately, it suggests that tariff threats are increasingly being used as a negotiation tool—an instrument to extract concessions and gain leverage over trading partners—rather than an end in themselves. The notable exception in my mind remains China, where Trump has a history of imposing tariff hikes. However, Beijing’s measured response, marked by surgical countermeasures rather than a full-blown economic assault, indicates a willingness to leave the door open for future negotiations.

Welcome to the trade war currency carousel—a roller coaster ride with more twists and turns than an amusement park attraction. With the global growth picture now brighter and the dollar softening, markets remain alert. Yet, the looming tariff threats, particularly with April 1 on the horizon for Trump’s trade team review, keep the uncertainty alive. The next few days and weeks promise to be pivotal in determining whether the current relief is temporary or the prelude to a deeper reset in the global trade landscape.