As the US tariff policy is about to be announced on April 2, market uncertainty will reach a new peak, and investors need to tighten their seat belts to prepare for volatility!
According to CCTV news on Saturday, reported on March 28 local time, US President Trump is expected to announce new tariffs in the next few days. He said he is somewhat open to reaching tariff agreements with other countries, but hinted that any agreement would be made after the tariffs take effect on April 2.
Asked if that would happen before the April 2 tariffs announcement, he said: “No, probably later.” Trump also reiterated plans to announce tariffs on drugs but declined to disclose specific tariffs.
Citi's latest report outlines three main scenarios and their implications for markets: first, retaliatory tariffs alone are announced, which would cause a relatively limited market reaction; second, retaliatory tariffs plus VAT, where the dollar index could immediately rise by 50-100 basis points and global equities could fall; third, industry-specific tariffs are included in addition to retaliatory tariffs and VAT, which could cause a stronger market reaction.
After the S&P 500 suffered its worst first quarter since 2020, analysts have warned that the potential for further declines outweighs the potential for growth. Some analysts point to future tariffs and retaliatory actions as key factors, with the market’s reaction on “April 2” largely depending on the timing of tariffs, especially sectoral tariffs, and how quickly other countries respond to retaliatory tariffs.
Three Tariff Scenarios
Citi's report pointed out that with the upcoming tariff measures announced on April 2, based on the survey results, the report summarized three main scenarios and analyzed their impact on the market:
· Scenario One, Retaliatory Tariffs Only Announced : If the Trump administration only announces retaliatory tariffs based on a simple Medium tariff differential under the Most-Favored Nation (MFN) principle on April 2, this would be a relatively mild outcome. According to a survey by Nomura Securities, about 25.5% of respondents believe this scenario is likely, with countries such as India, Thailand, and Indonesia likely to be most affected. In this scenario, the market reaction could be limited, and the dollar index may not fluctuate significantly.
· Scenario Two, Retaliatory Tariffs Plus VAT : If the tariffs include VAT, this would be a more aggressive move that could trigger risk-off sentiment and dollar strength. In this scenario, Germany’s MFN tariff differential (including 19% VAT) would be 20.4%, France’s would be 21.1%, and Spain’s 21.8%. Asia is also at risk, with Japan at 10.5%, India at 29.5%, and Thailand at 13.0%. This scenario could result in an immediate 50-100 basis point rise in the dollar index (DXY), but the dollar could weaken against the yen, and global equities could fall. Interest rates in Asia could fall, with India and Thailand seeing 5-7 basis points.
· Scenario Three, More Aggressive Tariff Policy : In addition to retaliatory tariffs and VAT, specific tariffs may be includedDisclaimer: This is a full and accurate translation of the original content into Vietnamese. If you need further support or corrections, let me know! for the industry. For example, Trump has previously announced a 25% tariff on imported finished cars (which could affect Mexico, South Korea, Japan, Canada, Germany) and hinted at the possibility of tariffs on semiconductors and pharmaceuticals (with South Korea and Singapore being the most affected). Additionally, he may not extend the 25% tariff on Mexico and Canada or impose tariffs on countries importing Venezuelan oil. In this scenario, the market reaction could be the most dramatic, with the dollar index likely to strengthen further and the dollar falling sharply against the Japanese yen.
Market Prepares for Volatility!
The US stock market's roller coaster ride is just getting started, with the S&P 500 heading for its worst first quarter since 2020, and looming tariffs could add further volatility.
The April 2 tariff policy announcement will reveal which countries and industries the Trump administration is targeting. Markets are expected to see significant volatility, with U.S. stocks heavily influenced by factors such as the severity of the tariffs, their duration, the countries and industries targeted, and retaliatory measures from trading partners.
