Gold, stocks wobbled on Trump’s flexible reciprocal tariffs

·       Wall Street slid on Trump’s reciprocal tariff-related Liberation Day 2nd April narrative but recovered on Trump’s ‘flexibility’ comments for US car companies

·       Trump may eventually blink again and postpone the ‘Liberation Day’

·       Wall Street also waved on quad witching and hawkish Fed talks

On Wednesday (19th March 25), Wall Street Futures and gold surged on a less hawkish Fed hold; Powell downplayed Trumpflation as transitory and sounded less hawkish than expected. But on early Thursday, Wall Street Futures and gold slumped, while USD surged as Trump warned Fed is making a policy mistake by not cutting rates as his potential reciprocal and sectoral or country-specific tariffs to be implemented from 2nd April’25 are set to destabilize the US economy into stagflation in the ‘transition’ period; i.e. Trump warned short term pain for long term gain.

On late Wednesday (19th March 25), US President Trump Truthed after Fed hold:

“The Fed would be MUCH better off CUTTING RATES as U.S. tariffs start to transition (ease!) their way into the economy. Do the right thing. April 2nd is Liberation Day in America!!!”

Earlier, Wall Street Futures were boosted by a report that the Trump admin is proactively negotiating with countries having the targets of reciprocal tariffs to reduce their exorbitantly high tariffs and also VATs/GSTs (sales tax) on US goods so that the US doesn’t have to impose higher tariffs on exports from those countries. But now, it seems that Trump may not oblige and he may be intentionally creating an economic disruption to force the Fed to a quicker rate cuts and end of QT fully.

On Friday (21st March 25), Trump again pressured the Fed and wrote in his Truth handle:

“Egg prices are WAY DOWN from the Biden-inspired prices of just a few weeks ago. “Groceries” and Gasoline are down, also. Now, if the Fed would do the right thing and lower interest rates, that would be great!!!”

Trump again celebrated 2nd April US Tariff Liberation Day:

“April 2nd is Liberation Day in America!!! For DECADES we have been ripped off and abused by every nation in the World, both friend and foe. Now it is finally time for the Good Ol’ USA to get some of that MONEY, and RESPECT, BACK. GOD BLESS AMERICA!!!”

As of March 21, 2025, the Trump administration is preparing to implement a series of reciprocal and sector-specific tariffs scheduled to take effect on April 2, 2025. These measures aim to address trade imbalances and protect domestic industries, and manufacturing jobs by imposing tariffs equivalent to those levied by other countries on U.S. exports.

Reciprocal Tariffs:

The administration plans to introduce reciprocal tariffs targeting countries that impose higher tariffs and sales taxes on U.S. goods. This policy is designed to equalize tariff rates and encourage fairer trade practices. Specific details regarding the affected countries and products have yet to be fully disclosed. The Trump administration plans to impose reciprocal tariffs on April 2, 2025, which means the U.S. will charge the same tariffs that other countries impose on U.S. goods. This policy aims to counteract perceived unfair trade practices by aligning U.S. tariffs with those of other nations.

President Trump has consistently emphasized his intention to implement reciprocal tariffs starting April 2, 2025. These tariffs aim to match the duties imposed by other countries on U.S. exports, addressing perceived trade imbalances. The policy dubbed the "Fair and Reciprocal Plan," was formalized through a Presidential Memorandum signed on February 13, 2025, directing federal agencies to develop a comprehensive plan.

Sector-Specific Tariffs:

In addition to reciprocal measures, sector-specific tariffs are set to be implemented. Trump has announced sectoral tariffs targeting specific industries. For instance, tariffs on steel and aluminum have already been increased to 25% effective March 12, 2025. Other sectors like automobiles, copper, and lumber are also under consideration for new tariffs.

Autos, Steel, and Aluminum: Alongside reciprocal tariffs, Trump has promised additional sectoral tariffs effective April 2, 2025. These include tariffs on automobiles, steel, and aluminum, though exact rates remain unspecified beyond existing measures. On March 12, 2025, 25% tariffs on steel imports and a raised 25% rate on aluminum imports from all countries took effect, with Trump rejecting exemptions. He has hinted at further increases or expansions on April 2, potentially targeting autos explicitly.

Steel and Aluminum: A 25% tariff on all steel and aluminum imports was announced on February 10, 2025, and took effect on March 12, 2025. This move aims to bolster domestic metal industries.

Automobiles: The administration has indicated potential 25% tariffs on automobile imports, particularly from the European Union, to protect the U.S. automotive sector.

Global Responses:

These impending tariffs have elicited varied reactions from international partners:

European Union (EU): The EU has postponed its retaliatory measures until mid-April to assess the impact of the U.S. tariffs and explore negotiation avenues. As per reports, France wants the European Union to consider deploying its most powerful retaliatory measure against the US for the first time if President Donald Trump uses tariffs to unfairly force the bloc to change its policies. France has joined a small group of EU countries who believe the so-called anti-coercion instrument - a tool designed to strike back against nations that use coercive trade and economic measures - should be on the table, even if it is not the preferred course of action.

Canada: In response to U.S. tariffs, Canada imposed 25% tariffs on approximately CA$30 billion (US$20.8 billion) worth of U.S. goods, effective March 4, 2025. Further measures are under consideration pending developments.

On Friday, President Trump again criticized Canada's trade practices, claiming the US does not need Canadian resources. He argued his country does "need their lumber, we don’t need their energy, we don't need anything from Canada." He went on to emphasize that the US subsidizes Canada with $200 billion annually to keep the country financially stable. Trump suggested that Canada should become a US state, stating, "It would be a cherished thing" as Canadian citizens would benefit from lower taxes. He also pointed out that Canada relies on US protection, citing the country's lack of military spending and dependence on the U.S. for resources like icebreakers. He described Canada as a "tough" trading partner, noting the challenging nature of their trade negotiations.

Mexico: Mexico has announced plans for retaliatory tariffs and non-tariff measures against the U.S., with specifics to be detailed in the coming weeks.

Canada and Mexico: Existing 25% tariffs on imports from Canada and Mexico, effective March 4, 2025, were partially delayed for autos and USMCA-covered goods until April 2, 2025. Trump has threatened additional measures if trade and border security demands (e.g., fentanyl control) aren’t met, though reciprocal tariffs will likely supersede or complement these on April 2.

China trade and tech war: A 10% tariff on all Chinese imports (on top of prior 20% levies) took effect March 4, 2025. Additional sectoral tariffs on Chinese goods, such as semiconductors and pharmaceuticals, are under consideration for April 2, though details are pending.

On Friday, the US Federal Communications Commission (FCC) launched a "sweeping" new investigation of businesses linked with the Chinese Communist Party (CCP) and which still operate in the US. The FCC is investigating several Chinese telecom companies, including Huawei and China Telecom, over concerns that some of them are ignoring restrictions on their operations in the US, posing national security risks. Furthermore, the FCC vowed it would prevent the companies included in its Covered List evade the restrictions and continue to do business in the US "on a private or unregulated basis.

The FCC said:

"The FCC has taken concrete actions to address the threats posed by Huawei, ZTE, China Telecom, and many other entities that pose an unacceptable risk to America’s national security, including by doing Communist China’s bidding. To safeguard our networks, the FCC has placed those CCP-aligned entities on our Covered List, and we have revoked many of the FCC authorizations that they had been operating under”.

European Union: Trump threatened 25% tariffs on EU imports on February 26, 2025, with potential escalation (e.g., 200% on EU alcohol) if the EU retaliates. These could align with the April 2 reciprocal tariff rollout, targeting sectors like pharmaceuticals and autos.

Domestic Considerations:

The U.S. agricultural, farming & dairy sector has expressed support for these tariffs, citing unfair trade practices by countries like Australia, and Canada that disadvantage American farmers. Industry groups are advocating for measures to level the playing field and protect domestic agriculture.

Economic Implications:

Both Wall Street and Main Street are quite concerned in anticipation of the tariffs and potential inflationary pressures and disruptions to global supply chains. The Federal Reserve and other central banks are monitoring the situation closely to mitigate adverse economic effects. As the April 2 implementation date approaches, further clarifications and adjustments to these trade policies may occur.

Economists warn that these tariffs could raise U.S. consumer prices (e.g., S&P Global estimates a 0.7% inflation bump from current tariffs) and slow growth, with the OECD forecasting a drag on GDP in the U.S., Canada, and Mexico. Retaliation risks are high, with the EU planning tariffs on $28 billion of U.S. goods starting April 1, and Canada targeting $21 billion.

Implementation and Negotiation Opportunities

Implementation Date: The tariffs are set to take effect on April 2, but countries can negotiate and avoid these tariffs if they agree to reduce their trade barriers. U.S. Treasury Secretary Scott Bessent suggested that countries could negotiate to circumvent a "tariff wall" by addressing issues like non-tariff barriers and unfair subsidies.

Negotiation Window: Despite the April 2 deadline, there might be a window for negotiations before the tariffs are enforced. However, a White House official clarified that any deals would need to be negotiated in advance to avoid the tariffs. The reciprocal tariffs will apply broadly, with no exemptions specified for any country unless pre-negotiated deals are reached. Trump has stated, “April 2 is a liberating day for our country,” signaling a firm commitment to this timeline. Negotiations are ongoing, with countries like India reportedly engaging to mitigate impacts, aiming for a trade deal by fall 2025.

Impact on India, the tariff and GST king

India's Position: India is currently engaged in talks with the U.S. to finalize a Bilateral Trade Agreement (BTA) by the end of the year. While India has not directly addressed reciprocal tariffs in these talks, officials are closely monitoring developments.

Potential Impact: The reciprocal tariffs could significantly affect India's exports, particularly in sectors like agriculture and pharmaceuticals, which have high tariff differentials from the U.S.

Current Status

As of now, no country-specific reciprocal tariffs have been officially imposed, and India is closely monitoring the situation, especially regarding duties on aluminum. The U.S. is still in the process of finalizing the details of these tariffs, which involves complex calculations across thousands of product codes. The White House has confirmed that Trump still intends for these tariffs to take effect on April 2, 2025, with no delays announced as of this date. The US Treasury Secretary Scott Bessent indicated on March 18, 2025, that each country would receive a "reciprocal tariff number" reflecting their tariffs, non-tariff barriers, and other trade practices (e.g., currency manipulation). Countries failing to negotiate reductions in their trade barriers before the deadline will face these tariffs.

Process: The Commerce Department, led by nominee Howard Lutnick, and other agencies are finalizing reports due by April 1, 2025, to determine specific tariff rates. These will consider tariffs, any domestic sales taxes (e.g., VAT, GST), and non-tariff barriers affecting U.S. exports.

Uncertainty and Ongoing Developments

Details of the reciprocal tariff rates and additional sectoral tariffs are still being finalized, with technical work led by the Commerce and Treasury Departments. Hiring delays and the complexity of calculating country-specific rates (considering 186 World Customs Organization members) have raised questions about readiness, but Trump and his team insist the April 2 deadline holds.

In summary, as of March 20, 2025, Trump’s reciprocal tariffs and additional sectoral/country-specific tariffs remain on track for April 2, 2025, with no official postponement. The administration is finalizing specifics, and global trade tensions are escalating as the deadline approaches. But Trump’s rhetoric suggests flexibility for preemptive deals (e.g., with India or Canada), but absent such agreements, the tariffs will proceed as planned. But deal maker Trump may also blink at the last minute, and postpone the reciprocal tariffs narrative to 1st July, paving the way for reaching the BTA with individual countries like India, EU, Canada, and Mexico.

The UK King Charles made an offer to Trump to join the Commonwealth, hoping to cool tensions: On Friday, Trump also responded to an article from the Sun that implies that UK King Charles will make an offer to Trump to ease tensions between the US and Canada by making the US an associate member of the Commonwealth, Trump responds: Sounds good to me.

On early Friday (21st March 25), Gold also got some boost, while US stock futures wobbled on a NYT report that Musk was invited by the Pentagon to discuss a plan for a potential US-China real war. According to a report by The NYT, Trump’s top aide Musk was scheduled to receive a top-secret briefing at the Pentagon regarding U.S. military plans for a potential conflict with China. The briefing purportedly included 20 to 30 slides detailing strategies and target options. However, this report has been strongly refuted by several high-ranking officials.

President Trump dismissed the claims as "ridiculous," stating that China would not be discussed during Musk's visit:

“The Fake News is at it again, this time the Failing New York Times. They said, incorrectly, that Elon Musk is going to the Pentagon tomorrow to be briefed on any potential “war with China.” How ridiculous?” China will not even be mentioned or discussed. How disgraceful it is that the discredited media can make up such lies. Anyway, the story is completely untrue!!!”

The US Defense Secretary Pete Hegseth clarified that the meeting with Musk was informal, focusing on innovation and production efficiency, and not related to any "top secret China war plans. The Pentagon spokesman Sean Parnell criticized the report as "completely fake" and "egregious," calling for its retraction. Musk also responded, labeling The New York Times report as "pure propaganda" and expressing intentions to identify and prosecute those allegedly leaking false information.

In summary, while The New York Times reported that Musk would be briefed on U.S. military plans concerning China, this has been categorically denied by President Trump, Defense Secretary Hegseth, Pentagon officials, and Musk himself. The NYT reported that Elon Musk was scheduled to receive a briefing at the Pentagon regarding the U.S. military's strategy for a potential conflict with China. According to unnamed U.S. officials, the briefing would include approximately 20 to 30 slides detailing the U.S. approach to such a confrontation, including timelines of potential threats from China, target options, and recommendations for President Trump to consider.

But Despite these denials, the WSJ confirmed that Musk was indeed set to receive classified (?) information on U.S. military strategies concerning China. The situation has raised concerns about Musk's potential conflicts of interest, given his significant business ties with both the Pentagon and China. Musk himself has called for legal action against Pentagon personnel who allegedly leaked the information to The New York Times, labeling the report as "maliciously false". The controversy highlights Musk's expanding role as an advisor to President Trump and the ethical implications of his access to classified military information.

On March 20, 2025, The New York Times published a report stating that the Pentagon was scheduled to brief Elon Musk on Friday, March 21, 2025, regarding the U.S. military’s plans for a potential war with China. According to the report, which cited two unnamed U.S. officials, the briefing was intended to cover highly sensitive operational plans—referred to as "O-plans" in military terminology—detailing how the United States would engage in a conflict with China. These plans are among the Pentagon’s most closely guarded secrets, and the briefing was reportedly set to include a presentation of 20 to 30 slides outlining the military strategy. A third official confirmed the briefing would be China-focused, while a fourth simply verified Musk’s presence at the Pentagon on that date.

The report highlighted the unusual nature of this access, noting that Musk, a billionaire and key adviser to President Donald Trump, holds no formal military position. As the head of SpaceX and Tesla, Musk has significant business interests in China and extensive contracts with the U.S. government, raising concerns about potential conflicts of interest. The New York Times suggested that the briefing might be linked to Musk’s role in the Department of Government Efficiency (DOGE), where he is tasked with cutting federal spending, possibly requiring insight into military priorities to avoid undermining critical defense systems.

However, shortly after the article’s publication, both Pentagon officials and President Trump denied that the briefing would focus on war plans involving China. A Pentagon spokesperson, Sean Parnell, labeled the Times’ reporting "100% Fake News," emphasizing Musk’s patriotism and downplaying the strategic significance of the visit.

Despite these denials, Musk did visit the Pentagon on March 21, 2025, meeting with Hegseth for approximately 80 minutes in the secretary’s office rather than the originally reported secure conference room known as "the Tank." Musk, upon leaving, described it as "always a great meeting," offering no further details. The shifting narrative—coupled with conflicting reports from outlets like The Wall Street Journal, which corroborated the Times’ initial claims—has left the true purpose of the visit unclear, fueling speculation about Musk’s expanding influence within the Trump administration and its implications for national security.

On Friday, Trump also announced a multibillion-dollar jet fighter (6G-F47) for Boeing. Trump may soon announce an imminent minerals agreement with Ukraine. Trump said (after dismantling the US Education Department):

·       US Air Force moving forward with sixth-generation fighter jet (to compete with China)

·       The Airforce will award the jet contract to Boeing

·       F-47 will be built during my administration

·       Allies also want to buy them

·       J&J Plans $55 Billion US Investment To "Accelerate American Innovation Engine

·       NATO is solid and strong, they have to treat the US fairly

·       I decided SBA will handle the student loan portfolio

·       Putin is worried when the US is involved (in NATO and Ukraine)

·       I hope we have the confines of a deal with Ukraine and Russia

·       Musk was at the Pentagon to address costs and DOGE

·       Trump on China tariffs: We can talk

·       I will speak with China’s President Xi

·       We can talk about China's tariffs

·       April 2nd will be Liberation Day

·       Now some of that money will come back as tariffs

·       Trump touts the Nvidia investment announcement

·       A lot of people asking for tariff exemptions

·       If you do tariff exemptions for one, you have to do for all

·       There will be flexibility in reciprocal tariff implementations

·       We can't be expected to carry Canada

·       Build plants in the US to avoid paying tariffs

·       I am not a fan of the CHIPS act

·       Tariffs are fair

·       Europe is lowering car tariffs, it's nice

·       Trump criticizes non-monetary Europe tariffs

·       The EU is very tough, whatever they do to us, we do to them

·       We are going to have a full ceasefire very soon in the Russia-Ukraine war

On Friday, in his White House presser, Trump dismissed the possibility of rolling back tariffs imposed on China and other countries, emphasizing that offering exemptions to individual countries would create an unfair precedent. "Once you do it for one, you do it for all," Trump said from the Oval Office while giving remarks with Secretary of Defense Pete Hegseth. He reinforced his stance against selective tariff relief. He stressed that the US had long been taken advantage of in trade and military agreements, with many nations offering little in return. "April 2nd will be liberation day for America," he insisted, signaling a significant shift in trade dynamics that he believes will benefit the country after years of "unfair" dealings.

Conclusions:

Trump may blink again and scale back or postpone reciprocal tariff implementations to 1st July from 2nd April for ‘progress’ on BTA (bilateral trade deal) with various countries including China, India, Canada, Mexico, and the EU. It’s the US importers and consumers, who have to bear the brunt of higher tariffs, not the exporters.  Trump also realized that the Fed is not going to cut rates before June’25 and thus he may also postpone his reciprocal and country-specific higher tariffs till at least June’25. The dealmaker Trump is using tariffs and US consumption as leverage to make concessions in trade and also forcing various US/foreign companies to invest in the ‘Liberated US” under his ‘Golden Age’.

Tariff Man Trump often talks about China’s huge trade surplus of over $1 trillion globally and $300 billion with the US. This is because the US and other countries are using China’s manufacturing hub as a cheaper outsourcing to maintain the comparatively lower cost of living. China has efficient industrial and logistical infra on a huge scale. The US imported Chinese goods as a compulsion as it had no alternative either domestically or even externally. China is not forcing the US to buy its goods at gunpoint.

Trump has to compete with China by developing comparable industrial and logistical infra including high-speed railway networks across America. Trump can’t simply replace Chinese goods by imposing draconian tariffs and waging tech & cold war. But Trump’s logic of reciprocal tariffs on countries like India is a good idea, although it may not be practical as India does not need US cars, pharmaceuticals, etc. In any way, Trump may impose some restrictions like H1B visas or even special service tariffs on India’s IT service exports.

Market Wrap:

On early Friday (21st March 25), Wall Street Futures crumbled on Trump’s ‘Liberation Day’ comments and a report that Trump is unmoved to craft a tariff deal. But later Wall Street Futures also recovered as Trump said there would be ‘some flexibility’ on tariffs implementation as Trump gave a one-month extension for US auto tariffs upon the request of US automakers to prepare for tariffs and potential disruption in existing supply chains. Also, hawkish Fed talks dragged the US stocks and also Gold. Wall Street Futures were quite volatile early Friday amid a "quadruple witching" event, during which stock options, index futures, index options, and single-stock futures all expire. FedEx and Nike tumbled on subdued guidance, while Boeing surged on US Airforce order of next-generation fighter jet.

On Friday, The S&P 500 edged up 0.1%, the Dow Jones added 31 points, and the Nasdaq-100 gained 0.5%. For the week, the S&P 500 was slightly higher, hardly broke 4-weekly losses, the Dow added 0.7% and the Nasdaq ended mostly muted.

Weekly-Technical trading levels: DJ-30, NQ-100, Gold and Dax

Looking ahead, whatever the fundamental narrative, technically Dow Future (CMP: 43850) now has to sustain over 44050 for any further rally to 44250/44400-44500/44800 and 45000/45200-45300/45500 and 45700/45800-45900/46000 in the coming days; otherwise sustaining below 44000, DJ-30 may again fall to 43800/43675-43300/43150 and 42800/42700-42000/41900 in the coming days.

Similarly, NQ-100 Future (20915) has to sustain over 21050 for a further rally to 21300/21500-21700/21850 and 22050/22200-22350/22500 and 22700/23000-23300/23500 in the coming days; otherwise, sustaining below 21000, NQ-100 may again fall to 20900/20600-20400/20150 in the coming days.

Technically, DAX-40 (22500) now has to sustain over 22700 for a rally to 22800/22/900-23000/23500 and 23600/23700-23800/24000; otherwise, sustaining below 22650/22550, may again fall to 22250/21850-21700/21100 and 20800/20000-19700/19000-18850 in the coming days.

Also, technically Gold (CMP: 2985) has to sustain over 3005-3010 for a further rally t 3025/3060*-3075/3100 and 3125/3150-3200/3225; otherwise sustaining below 3000-2995, Gold may again fall to 29650/2925-2900/2880 and 2850/2835-2810/2780-2780 and 2745/2725-2695/2665 and further 2635/2600-2585/2560 in the coming days.