Markets Rattled as Trump Unleashes 25% Tariffs—What’s Next?
Digital Asset Market: Bitcoin's price action continued to be sluggish on Tuesday, with the cryptocurrency trading at $93,600, marking a 2% decline over the past 24 hours and a 10% drop over the past week. The overall crypto market fell by 4% within the same period, impacted by Solana's significant 16% decline, partly due to issues in the memecoin market. Despite this bearish trend, Standard Chartered's Geoff Kendrick remains optimistic, projecting Bitcoin to surpass $500,000 by the end of Donald Trump's presidency. He points to the evolving buyer profile in the bitcoin market, which now includes banks and sovereigns, as a positive sign. Kendrick highlights increased institutional interest in bitcoin ETFs, exemplified by investments from Goldman Sachs and Abu Dhabi, as indicators of potential long-term growth and greater sovereign participation.
Macro Economics: President Donald Trump announced that auto tariffs will be set around 25%, with further details to be disclosed on April 2. These tariffs are part of a broader strategy to reshape global trade and address what Trump perceives as the unfair treatment of U.S. automotive exports. The European Union, for example, imposes a 10% tariff on vehicle imports, compared to the U.S.'s 2.5% passenger car tariff, though the U.S. does have a 25% tariff on imported pickup trucks. Trump also indicated an initial 25% sectoral tariff on pharmaceuticals and semiconductor chips, with potential increases over the year. This is part of a series of tariffs, including a 10% levy on Chinese imports and impending 25% tariffs on Mexican and Canadian goods, as well as on imported steel and aluminum, all part of his administration's focus on reciprocal tariffs for countries taxing U.S. imports.
Equities: The S&P 500 reached a record high on Tuesday, closing at 6,129.58 after a late-session rally, with the index gaining 0.24%. The Nasdaq Composite rose 0.07%, and the Dow Jones Industrial Average added 10 points to close at 44,556.34. Energy stocks led the gains, particularly Halliburton and Valero Energy, while tech stocks also increased. However, consumer discretionary and communication services sectors experienced declines, impacting the broader market. Investors focus on global trade tensions and inflation data, with recent gains partly driven by optimism over President Trump's tariff plans. Market volatility persists as inflation concerns and Federal Reserve policies remain central, but there's cautious optimism about future economic conditions.
Intel's shares surged by 16.1% after a Wall Street Journal report suggested that Broadcom and Taiwan Semiconductor Manufacturing Company (TSMC) are considering acquiring parts of the struggling chipmaker. Specifically, Broadcom might be interested in Intel's chip design and marketing division, while TSMC could be looking at Intel's factory operations. These potential bids have yet to be formalized, as discussions are still in the early stages.
The Fed and US Treasury: The upcoming week will see less economic news, focusing on the Federal Reserve's January meeting minutes and updates on manufacturing, services, and consumer sentiment. Recent inflation data for January exceeded Wall Street's expectations but indicated a potential slowdown in price increases when examining key components influencing the Fed's preferred inflation measure, the PCE index. Economists now anticipate that core PCE inflation might have slowed to 2.6% in January from 2.8% in December. Markets still expect possible Fed rate cuts in 2025, with economists feeling the Fed leans more towards cutting rates rather than raising them. The Fed's January meeting minutes, set to be released on Wednesday, will be scrutinized for insights on the future direction of interest rates.
Geopolitical: Ukrainian President Volodymyr Zelensky abruptly canceled his planned visit to Saudi Arabia after being excluded from US-Russia peace talks held there, as he sought to garner international support during the ongoing Russia-Ukraine war. The talks, hosted by the Saudi government and led by Sergey Lavrov and Marco Rubio for Russia and the US, respectively, aimed at negotiating peace without Ukrainian involvement, which angered Zelensky. As reported, the discussions led to a tentative agreement for elections in Ukraine, a move opposed by Zelensky due to martial law. Russian President Putin deems Zelensky illegitimate without elections, complicating potential peace agreements. The exclusion provoked frustrations from Kyiv and hinted at deteriorating US-Ukrainian relations. responsibility. It is even more interesting that the intermediating party is Saudi Arabia and MBS.
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Crypto markets remain sluggish, lacking clear direction despite strong support at the 90K+ level. However, a lack of decisive policy moves or major announcements from the new administration has left investors in a holding pattern. The administration’s focus remains on tariffs, immigration, DOGE, and geopolitical tensions, particularly concerning Ukraine. While this cautious approach was expected, the crypto community's growing impatience is notable, even though these broader economic and political issues are more immediate and consequential.
The most significant impact of tariff and immigration policies is likely to be felt in the housing market, which is already struggling with a severe supply shortage and record-high home prices. In February, sentiment among single-family homebuilders dropped to its lowest level in five months, reflecting fears that new tariffs could further drive up costs. The National Association of Home Builders’ Housing Market Index fell five points to 42, slipping deeper into negative territory below the neutral threshold of 50. Builders are bracing for higher costs on key materials like appliances and softwood lumber, compounding affordability challenges already exacerbated by elevated mortgage rates and home prices.
With mortgage rates lingering above 7% and affordability deteriorating, buyer demand continues to decline. Hopes that pro-development policies and lower interest rates might provide relief have faded as supply constraints and economic uncertainty weigh on the market. While some builders have scaled back price cuts, the effectiveness of sales incentives has diminished, leaving fewer viable options to stimulate demand. At this stage, there is no clear solution to reversing the affordability crisis, and the outlook for homebuilders remains uncertain.
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