Optimistic Flexibility

Market Musings 3/25/2025

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

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Are markets getting too optimistic for teased tariff “flexibility”?

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What began with Friday’s “flexibility” teaser, markets are gaining momentum ahead of what they hope are reduced-scope #Tariffs incoming next week.

Markets began the rally Friday midday after the White House teased that “there’ll be flexibility” for the incoming #Tariffs. Then, we got some leaks over the weekend with reports that the next batch of #Tariffs will be more focused and likely limited to a dozen or so countries.

Since, markets have latched onto the optimism up almost 2% to start this week. However, outside of the tease and weekend leaks, there’s still essentially no new info－just speculation.

So let’s take a look at the #Tariffs so far and what this could mean…

The broad Canada and Mexico 25% #Tariffs have essentially been delayed twice. First in February－after deals to promise more border security and then followed by a false start in March after some trade war back and forth. However, they are still set to go into effect next week.

We’ll have to see if the “flexibility” extends to them and they’re reworked to be more specific and targeted.

Meanwhile, China’s broad #Tariffs went into effect in February and then doubled in March. China has retaliated with #Tariffs in return both times.

We think it’s unlikely to see any #Tariffs shifts here. If anything, we’ll see if the White House tacks on more #Tariffs to China next week.

Finally, markets are waiting for the global reciprocal #Tariffs to be announced.

The 25% on steel and aluminum has already been imposed and trade war threats a couple weeks ago. The EU threaten targeted retaliatory #Tariffs on goods like whiskey, jeans and peanut butter while the US threatened back 200% #Tariffs on wine.

Markets have been hoping the White House would dial back the aggression. The hopes likely increased after the EU delayed its retaliatory #Tariffs by a couple weeks to allow for negotiation.

However, we think it’s unlikely the EU will avoid #Tariffs this round. The White House has accused the EU repeatedly of unfair trading practices. The EU is the US’s largest trading partner and any trade war would likely have consequences.

While we’re hopeful that the White House is actually dialing back the #Tariffs rhetoric, we could see the market also being overly optimistic after the pessimism from March.