As the U.S. tariff policy is about to be revealed on April 2nd, market uncertainty will reach a new peak, and investors need to fasten their seatbelts to prepare for turbulence!

According to CCTV News on Saturday, it was learned on March 28th local time that U.S. President Trump plans to announce new tariffs in the coming days. He stated that he is somewhat open to reaching tariff agreements with other countries, but hinted that any agreement would be reached after the tariff measures take effect on April 2nd.

When asked if this would happen before the tariff announcement on April 2nd, he said: "No, likely later." Trump also reiterated his plan to announce drug tariffs but refused to disclose the specific tax rates.

Citi's latest report summarized three main scenarios and their market impacts: first, announcing only reciprocal tariffs, which would have a relatively limited market reaction; second, reciprocal tariffs plus VAT, where the dollar index could immediately rise 50-100 basis points, and global stocks might fall; third, including industry-specific tariffs in addition to reciprocal tariffs and VAT, which could trigger a more intense market reaction.

After the S&P 500 experienced its worst first quarter since 2020, analysts have been warning that the potential for further decline is greater than the potential for growth. Some analyses indicate that future tariffs and retaliatory actions are key, and the market reaction on "April 2nd" will largely depend on the timing of tariffs, especially industry tariffs and the speed of other countries' responses to reciprocal tariffs.

Three Tariff Scenarios

The Citi report points out that with the tariff measures announcement imminent on April 2nd, based on survey results, it summarized three main scenarios and analyzed their market impacts:

· Scenario One, Announcing Only Reciprocal Tariffs: If the Trump administration only announces reciprocal tariffs based on the Most Favored Nation (MFN) simple average tariff gap on April 2nd, this would be a relatively mild outcome. According to Nomura Securities' survey, about 25.5% of respondents believe this scenario is likely, with countries like India, Thailand, and Indonesia potentially being most affected. In this scenario, market reaction might be limited, and the dollar index may not experience significant fluctuations.

· Scenario Two, Reciprocal Tariffs Plus VAT: If the tariff policy includes VAT, this would be a more aggressive move that could trigger risk aversion and dollar strength. In this scenario, Germany's MFN tariff gap (including 19% VAT) is 20.4%, France is 21.1%, and Spain is 21.8%. The Asian region also faces risks, with Japan at 10.5%, India at 29.5%, and Thailand at 13.0%. This scenario could cause the dollar index (DXY) to immediately rise 50-100 basis points, but the dollar might weaken against the yen, and global stocks could fall. Asian interest rates might drop, with India and Thailand potentially declining 5-7 basis points.

· Scenario Three, More Aggressive Tariff Policy: In addition to reciprocal tariffs and VAT, industry-specific tariffs might be included. For example, Trump previously announced a 25% tariff on imported finished cars (potentially affecting Mexico, South Korea, Japan, Canada, Germany) and hinted at possible tariffs on semiconductor chips and drugs (with South Korea and Singapore most affected). Additionally, he might not extend the 25% tariffs on Mexico and Canada or impose tariffs on countries importing Venezuelan oil. In this scenario, market reaction could be most intense, with the dollar index potentially strengthening further and the dollar potentially falling sharply against the yen.

Market Prepares for Turbulence!

The U.S. stock market's "roller coaster" journey has just begun, with the S&P 500 heading towards its worst first quarter since 2020, and the upcoming tariff policy may further exacerbate market volatility.

The tariff policy statement on April 2nd will reveal which countries and industries the Trump administration will target. The market expects significant fluctuations, with U.S. stocks to be severely impacted by factors such as the severity of tariffs, duration, target countries and industries, and retaliatory measures from trading partners.

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