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U.S. Trade War Intensifies as Trump Introduces New Tariffs

(Reuters) – President Donald Trump has taken significant steps to escalate the ongoing trade conflict by announcing new reciprocal tariffs aimed at counterbalancing duties imposed on U.S. products by other nations. This announcement marks a pivotal moment in U.S. trade policy.

During a gathering in the White House Rose Garden, Trump declared, “It’s our declaration of independence,” as he described his administration’s intentions to implement a baseline tariff of 10%. This new structure places tariffs on various countries: China will face a steep rate of 34%, while the European Union and Japan will encounter tariffs of 20% and 24%, respectively.

MARKET REACTION: Following the announcement, S&P 500 futures dropped by 3%, signaling investor fears of significant losses when trading resumes on Wall Street. Similar declines were observed in stock markets globally, with U.S. Treasury yields also falling, and the Chinese yuan dropping to its lowest level in a month.

Expert Reactions

Industry experts have offered varied interpretations of the tariff hikes. Below are some insights from key financial analysts:

NIGEL GREEN, CEO, DEVERE GROUP, DUBAI, UAE

Green posits that these tariffs threaten to undermine the global economy, characterizing the situation as “a seismic day for global trade.” He emphasized that tariffs operate effectively as taxes, placing the financial burden primarily on American consumers. He expressed concern that uncertainty in trade policy could lead companies to halt hiring and investment, creating a ripple effect that may precipitate a recession.

SCOTT WREN, SENIOR GLOBAL MARKET STRATEGIST, WELLS FARGO INVESTMENT INSTITUTE, ST LOUIS, MISSOURI

Wren described the announcements as unsurprising yet cautioned that the actual market implications could foster a more cautious investment climate. He noted a focus on large-cap and mid-cap stocks despite the current pressure, asserting a positive outlook for the latter half of the year.

OLGA YANGOL, MANAGING DIRECTOR, CREDIT AGRICOLE CIB- AMERICAS, NEW YORK

Yangol expressed skepticism regarding the impact of tariffs on various countries, noting that Brazil appears to fare better than others. She highlighted the need to analyze the specific ramifications for each country involved.

OLGA BITEL, GLOBAL STRATEGIST, WILLIAM BLAIR & CO, CHICAGO

Bitel raised questions about the future of U.S. dominance in global trade, suggesting that multiple nations possess the capability to respond to U.S. tariffs. She warned that the situation might lead to ongoing instability and unpredictability in international trade relations.

ERIC M. CLARK, CHIEF INVESTMENT OFFICER, ALPHA BRANDS PORTFOLIO MANAGER, SAN DIEGO, CALIFORNIA

Clark warned of potential shifts in consumer behavior in China and elsewhere, emphasizing that forced changes in purchasing patterns could foster long-term consequences. He expressed concern over the nationalistic tendencies these tariffs could incite, especially given the reliance of many U.S. companies on international revenue streams.

JEANETTE GERRATTY, CHIEF ECONOMIST, ROBERTSON STEPHENS, MENLO PARK, CA.

Gerratty noted the breadth and scale of the tariffs, suggesting that they could indeed hamper economic growth and elevate prices across various sectors. She contended that the current circumstances highlight the inevitability of repercussions.

MICHAEL MULLANEY, DIRECTOR OF GLOBAL MARKETS RESEARCH, BOSTON PARTNERS, BOSTON

Mullaney warned that while the 10% baseline may seem reasonable, the eventual financial fallout could dampen earnings expectations for companies indexed in the S&P 500.

SARAH KETTERER, CEO, CAUSEWAY CAPITAL MANAGEMENT, LOS ANGELES

Ketterer indicated that the new tariffs are only the beginning of extensive negotiations. She remains optimistic about the potential for global equities, particularly in Europe, to outperform due to increased spending.

BYRON ANDERSON, HEAD OF FIXED INCOME, LAFFER TENGLER INVESTMENTS, SCOTTSDALE, ARIZONA

Anderson commented on the potential for deflation as trade partners might reciprocate with tariff reductions, advising that market positions could shift as safety trades become less dominant.

JOHN HARDY, CHIEF MACRO STRATEGIST, SAXO BANK, COPENHAGEN

Hardy expressed skepticism regarding the market’s immediate reaction to the tariffs, suggesting that safe havens like the Japanese yen and U.S. Treasuries may see increased demand as investors seek stability.

JASON BRITTON, CHIEF INVESTMENT OFFICER, REFLECTION ASSET MANAGEMENT, CHARLESTON, SOUTH CAROLINA

Britton viewed the tariffs as a starting point for further rounds of negotiation, noting the potential for market recalibration as the situation unfolds.

PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK

Cardillo cautioned that the consequences of the tariffs could exacerbate inflation concerns and complicate the Federal Reserve’s decision-making process amidst a potentially slowing economy. Yet, he noted that a market recovery could be on the horizon as conditions stabilize.

(Compiled by the Global Finance & Markets Breaking News team; Editing by Lincoln Feast.)

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