Reciprocal Tariff Delay 😅

Market Musings 4/9/2025

Quick thoughts on the markets and major portfolio news. Not on Ursa yet? Download Ursa from the App Store!

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Markets surge on reciprocal #Tariffs delay, but China trade war escalates…

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After markets crashed, the White House started to cave on their #Tariffs plans. Only the universal 10% baseline #Tariffs will remain in effect and the additional reciprocal #Tariffs delayed for 90 days. This likely gives some breathing room for negotiations.

Markets rejoiced on the news with a sharp rebound today－up almost 10%. However, despite the euphoria, the celebration may be a little premature…

First, China has been in a tit for tat trade war with the US and excluded from today’s delay. China has retaliated every round with US responding each time. On the initial two 10% #Tariffs, China retaliated with targeted #Tariffs. This month, China has just matched whatever the US adds－34% from last week and again with Monday’s 50%. This adds up to 104% US #Tariffs on China and 84% China #Tariffs on US. Today, the US announced another 21% taking China #Tariffs up to 125% and we expect China to match again.

What we have is two countries playing chicken… These are massive #Tariffs. Let’s take a $1,000 iPhone as an example – this could raise the price to $2,000-$3,000… It’s not just the iPhone, China makes or plays a part in manufacturing a lot of what we consume. We see it having an impact on near-term #Inflation.

Second, only the higher reciprocal #Tariffs were delayed with 10% baseline is still in effect. This is essentially still driving a 10% price increase on all imports. This also likely contributes to near-term #Inflation.

Finally, third, a delay is just pushing the can further down the road. Markets cheered in February & March for #Tariffs delays－just to have more drama closer to the deadline. Given the uncertainty, we could see prices start to work in expectations for future #Tariffs－also driving up #Inflation.

Markets were obviously excited to see the White House blink first with a delay, but this doesn’t resolve the macro instability. We still have an escalating trade war with China, a 10% global #Tariffs and trade uncertainty despite the delay.

We also still see the EU as a wildcard. Even without the extra 10% reciprocal #Tariffs, they’ve still seen multiple #Tariffs imposed on them and haven’t fully responded yet. We could see them interpret the White House caving today as a sign the US’s position on #Tariffs may not be as solid as before.