Market Update: Tariffs, Trade Policy, and What It Means for Investors
- Eiger
- Apr 3
- 4 min read
Yesterday afternoon, President Trump announced a sweeping new tariff policy that has sent ripple effects through the global markets. The newly proposed tariffs are broader and more aggressive than previously expected and have pushed U.S. stocks back into correction territory—down over 10% from the February highs.
While the S&P 500 was only down 3.3% year-to-date before the announcement, the recent drop highlights the market’s sensitivity to trade uncertainty. In contrast, international equities were up 6.5% YTD and the U.S. Bond Aggregate Index was up nearly 3.0%, helping diversified portfolios hold up relatively well in this environment.
Key Highlights from the New Tariff Policy:
A baseline 10% tariff on all countries, effective April 5
Higher “reciprocal” tariffs against countries that impose higher duties on U.S. goods (or where significant trade imbalances exist), effective April 9
Sector-specific tariffs, including a 25% tariff on automobiles and parts, now set to take effect April 3
Notable reciprocal tariff levels:
China: 54% total (including 20% already in effect)
Vietnam: 46%
India: 26%
Japan: 24%
South Korea: 25%
Taiwan: 32%
Eurozone: 20% (in addition to steel and aluminum tariffs)
UK: 10%
Canada & Mexico: 25%, with exemptions for USMCA-compliant goods
Although initially thought to be immediate, the delayed effective dates provide a brief window for negotiations. However, history has shown that rapid changes often follow such announcements, making short-term trading around tariff headlines especially challenging.
Sector and Economic Impact
While the full implications are still unfolding, we anticipate the tariffs may weigh on global economic sentiment in the short term and introduce heightened volatility across asset classes. Key areas of potential impact include:
Industrials & Manufacturing – vulnerable due to reliance on steel, aluminum, and global supply chains
Automobiles – likely hit by the 25% tariff on finished cars and parts
Retail & Consumer Goods – may face margin pressure from higher input costs
Technology & Electronics – exposed due to component imports, especially from Asia
Clients with diversified allocations to international equities and fixed income have seen more stability year-to-date, a testament to the value of broad portfolio diversification.
What We’re Watching
1. Employment Trends
A strong labor market has been the cornerstone of the economic expansion. February’s report showed 155,000 jobs added. This Friday's March employment data will be key—another solid number could bolster investor confidence. Weakness, however, would support the growing negative sentiment and potentially validate concerns that tariffs could slow growth.
2. Corporate Earnings (Q1)
Earnings season begins next week, and tariff commentary is expected to dominate CEO remarks. Investor focus will be on forward guidance, as earnings expectations have thus far remained resilient. If CEOs begin revising guidance downward in response to cost pressures or supply chain uncertainty, that could add further headwinds.
3. Global Retaliation
As negotiations begin, we anticipate retaliatory rhetoric—and possibly action—from major trading partners. Previous tariff rounds led to retaliatory tariffs on U.S. agriculture, tech, and other goods. This could dampen export activity and further complicate the earnings outlook for global-facing U.S. companies.
4. The U.S. Dollar and Inflation
Tariffs may drive short-term dollar strength, but if they persist, the resulting supply chain pressures and higher input costs could fuel inflation. In that scenario, the Fed could be forced to respond with tighter monetary policy—another potential headwind for markets.
Navigating the Uncertainty
We often get asked whether these trade policies are primarily political or economic. Regardless of intent, our focus remains on evaluating:
Economic impact, particularly employment and consumer resilience
Corporate earnings, which ultimately drive equity valuations
The White House appears to be betting that this aggressive posture will lead to lower global tariffs in the long run, though that outcome is far from certain—especially with a 10% broad-based tariff already set to begin.
In the meantime, volatility is likely to persist, and markets may continue to react sharply to trade headlines. However, as we’ve seen this year, diversified portfolios that include international exposure and fixed income have provided meaningful downside protection.
Our Positioning
Rather than trying to time markets during periods of uncertainty, we continue to emphasize:
Maintaining diversified, global portfolios
Rebalancing where appropriate
Monitoring key data points like employment, inflation, and earnings trends
Remaining focused on long-term fundamentals rather than short-term headlines
If tariffs become permanent fixtures rather than temporary negotiating tools, we may reassess longer-term portfolio positioning. But for now, we believe that maintaining a disciplined approach continues to be the most prudent path forward.
If you have any questions or would like to discuss how these developments may affect your portfolio, please don’t hesitate to reach out.
The information contained on this site may not reflect current developments; does not constitute investment, tax, or legal advice; and should not be relied upon for such purposes. There is no guarantee that any forecasts made will come to pass. We make no representation about the accuracy of the information or its appropriateness for any given situation. This information is not an offering. Past performance does not guarantee future results.
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