Auto tariffs kick in on April 2 — Where the rubber meets the road

Market wrap

Asia equities followed Wall Street into the plunge tank on Thursday, though the dip wasn’t as deep. Markets initially found solace in Trump’s attempt to soften the blow—calling next week’s reciprocal tariffs “very lenient,” and even dangling the prospect of tariff relief for China in exchange for progress on the TikTok deal. But don’t be fooled—when it comes to autos, Trump’s playing hardball.

He’s made it clear: auto tariffs are here to stay for his full term—no exemptions, no negotiations. That hits Mexico, Japan, and South Korea the hardest, as they collectively account for over 60% of U.S. vehicle imports. While USMCA-compliant parts remain in the clear for now, auto tariffs kick in on April 2, and that’s where the rubber meets the road.

Forex markets

In FX, we’re staring down a classic tariff-induced identity crisis: do we sell the dollar on weaker U.S. growth prospects or buy it on inflation spillover and rate-sticky Fed dynamics? The tug-of-war is playing out in USD/JPY, and so far in Asia, FX traders are leaning into the “growth hit” narrative, prompting a pullback from recent highs. Keep an eye on the 10-year US bond yield, though.

Meanwhile, EUR/USD caught a bid as some mean-reversion players took back some shorts, covering 100-200 pips, depending on where the average is—no home run by any means, but no chump change.

For the broader dollar, U.S. reciprocal tariffs are the joker in next week’s deck—an unpredictable catalyst injecting just enough uncertainty to keep global central banks, especially the ECB, flying IFR-style through dense policy fog. As Europe opens the fiscal floodgates and geopolitical crosscurrents heat up, the ECB’s policy communication is beginning to sound less like a coordinated strategy and more like a choir singing in dissonance.

On the dovish end, Villeroy’s out planting rate-cut breadcrumbs, assuring French lawmakers that the inflation dragon is nearly slain and there's still room to cut pragmatically. But then you've got Holzmann from Austria charging in with a hawkish rebuttal, warning that tariffs and defense budgets are potential inflation accelerants just as the ECB is prepping to ease. It’s the classic good cop/bad cop routine, but the market’s reaction was telling: crickets.

Why? Because Holzmann’s hawk feathers are already priced in. The real action is on the dovish pivot, with traders front-running it hard. The April ECB meeting has nearly 18bps priced, which implies a 70% chance of a 25bp cut, and the rates market is already steepening in anticipation.

The 2s10s spread is marching back toward monthly highs, while the 10s30s swap curve is clawing toward disinversion, now at its steepest since early 2022.

If it looks like a rate cut and the curve hints at a rate cut, it’s likely a rate cut

The modern day Gold rush

A gold rush of the modern kind is distorting U.S. trade data, as bullion bars raced across continents en route to New York, leaving a glittering trail through Switzerland and blowing out the U.S. trade deficit to record levels in January.

In February alone, 147.4 metric tons of gold—worth over $14 billion—made their way from Swiss refineries to the U.S., marking the second-largest monthly haul since records began in 2012, just behind January’s staggering 193 tons. The flood shows no signs of slowing.

What’s driving the bullion bonanza? For one, fears that gold might get entangled in sweeping U.S. import tariffs. That, combined with safe-haven demand, has propelled New York gold futures well above $3,000 an ounce. At the height of the rally, futures traded at a premium to spot prices, signaling intense delivery demand on U.S. exchanges.

Here’s the kicker: while much of the gold originates in London, the world’s top physical trading hub, it’s routed through Swiss refiners to be melted down and recast into 100-ounce COMEX-compliant bars. That transformation detour turns into a massive import event in U.S. trade data.

The surge in Swiss imports pushed the merchandise trade deficit to a record in January, and economists believe February offered only modest relief. Though investment gold is excluded from GDP calculations, the sheer volume of imports is muddying the macro picture—making it increasingly difficult for analysts to pin down just how much net exports will weigh on Q1 growth prints.

Bottom line? When bullion gets tangled up in tariff hedging, safe-haven scrambling, and delivery logistics, it can leave a bigger economic footprint than most commodities, especially when measured in tons and billions.

Gold opened the week on a slightly softer note, as reports hinted that President Trump’s upcoming “Liberation Day” tariff salvo on April 2 may be more surgical than scorched earth, according to sources close to the administration. The market read: less tariff shock = lower near-term Fed cut odds, and that took a bit of the immediate shine off the yellow metal.

But the pullback was short-lived. The underlying correlation remains intact—the more aggressive the tariffs, the greater the economic drag, and the higher the chance the Fed blinks. That’s gold-positive. And with uncertainty still swirling around the scope and sequencing of the trade action, gold has quickly found its footing, rebounding roughly $30 off intra-week lows and continuing to hold firm above the psychologically critical $3,000 level.

The broader narrative is still tilted toward economic dislocation. With central banks quietly accumulating and Asian physical demand ramping up, this week’s dip looks increasingly like a healthy consolidation rather than a breakdown. In other words, gold is not losing altitude—it’s just circling the runway for another takeoff.