Trump's tariff policy has finally taken effect, but the intensity is even stronger than everyone expected, leaving the market quite shaken.
U.S. stock index futures have seen a sharp decline, with both NASDAQ and S&P 500 futures dropping nearly 4%.
Bitcoin also experienced a significant drop after hitting a high, currently fluctuating around $83,400.
So what's going on here?
At first, Trump said the reciprocal tariff would be 10%, and the market was quite excited.
U.S. stocks surged, and Bitcoin nearly reached $90,000.
But then Trump changed his tone, saying this 'reciprocal tariff' is not simply fixed at 10%.
Instead, it's about how much other countries charge the U.S. in tariffs, and the U.S. will reciprocate half of that, starting at a minimum of 10%.
For example: China charges 68% on the U.S., so the U.S. charges China 34%; the EU charges 40%, and the U.S. charges 20%; Vietnam charges 92%, and the U.S. charges 46%.
And this isn't the end; it's even harsher for cars, with a flat 25% tariff on all imported vehicles, regardless of their country of origin.
A timetable has also been set: on April 5, a 10% base tariff will be collected first, and by April 9, the reciprocal tariffs will officially take effect.
That is to say, from today until April 9, countries have one more week to negotiate with the U.S. to see if they can reduce tariffs on the U.S.; otherwise, the trade war will really start on the 9th.
Why is the market so scared?
Because once the trade war starts, imported goods will become more expensive, U.S. company costs will directly soar, and the prices of the goods they sell will also have to increase.
Consumers see prices soaring and stop buying. If companies can't sell, profits vanish, and stock prices naturally collapse.
For example, if a 25% tariff is imposed on auto companies, car prices will skyrocket, and sales will surely plummet.
That's why U.S. stock futures are crashing hard; everyone is afraid companies won't make money and are quickly selling stocks to hedge.
So how will the market move next? Is a trade war really going to break out?
This tariff policy is considered the hardest version from previous rumors. If this actually happens, a major trade war is unavoidable.
Analysts at China International Capital Corporation calculated that if the global baseline tariff is 10%, plus a 60% tariff on China, and we also consider retaliatory measures from other countries, U.S. inflation could be pushed up by nearly 2 percentage points by 2025, potentially reaching 4-5% by the end of the year.
In the short term, market volatility will increase, and the tug-of-war between bulls and bears will be intense, with sentiment dominating the market.
These days may not even be the worst, because many people believe this matter can still be negotiated and won't reach the worst conclusion.
It's like someone holding a knife to your neck, saying they will give you a few days to negotiate terms: will they stab you directly or just give you a few cuts.
You definitely won't feel like you're doomed; instead, you'll be wondering if you can avoid a few cuts. So the market hasn't yet reacted to the worst-case scenario.
In the end, whether it rises or falls depends on the gap between expectations of being 'cut a few times' and the actual 'cuts' received.
Next, we can focus on a few things: will countries retaliate with increased tariffs? How long can reciprocal tariffs last? Can negotiations succeed? When will negotiations start?
By May to June, the market will focus on the inflation pressures brought by tariffs and speculate on whether the Federal Reserve will cut rates.
Currently, the mainstream view on Wall Street is that there is a 60% chance the Federal Reserve will cut interest rates in June, and they believe the Fed will eventually have to restart rate cuts.
At that time, two key things to watch: inflation data after tariffs take effect and the Federal Reserve's statements.
Overall, Trump played the tariff card quite hard, and the market is significantly rattled.
However, the worst expectations are now on the table, and the next step is to see how different countries negotiate with the U.S.
As long as there is some good news, such as someone lowering tariffs or reaching a certain agreement, market confidence can be boosted.
Once market sentiment returns, the situation will quickly stabilize.
