US market: Tariff news is clearly all that matters at the moment
The decision of President Trump to impose a completely unprecedented 104% tariff (which was later hiked to 125%) on Chinese imports was greeted with another bout of dollar selling early on Wednesday.
While American exports to China are small as a percentage of US GDP (only 0.5% vs. 3% in the other direction), markets are fearful that the lack of obvious substitutes for Chinese goods could significantly disrupt supply chains and amplify the risk of a US slowdown.
These concerns seem somewhat inconsequential for now, with markets breathing a big sigh of relief that tariffs towards almost all other countries have been downgraded to just 10% (at least temporarily).
While tariff news is clearly all that matters at the moment, we will still be watching this afternoon’s inflation data for March.
That said, with the US inflation outlook changed almost beyond recognition in the past week, we will have to wait some time before the impact of the tariffs is reflected in earnest in the data.
Author
Matthew Ryan, CFA
Ebury
Matthew is Global Head of Market Strategy at FX specialist Ebury, where he has been part of the strategy team since 2014. He provides fundamental FX analysis for a wide range of G10 and emerging market currencies.
