“Liberation Day” had been well flagged, with 10% universal tariffs inline with expectations, though the scale on some countries likely exceeded consensus, but it’s not the worst-case scenario.
The key to the market is now whether the next few days brings negotiation or tit-for-tat measures.
- An aggressive response by China, Europe and others will be bad for markets.
- Trump has left the door open to dialogue, suggesting tariffs could be lifted if foreign governments agree to remove theirs on US goods. Evidence of this would be good for markets.
We think there is a strong possibility of negotiation, though we have certainly not discounted the near-term risk of retaliation. The coming days will be important, and unfortunately, tariff talk will be around for some time yet.
Locally, Australia is okay and we do not anticipate a material direct impact on the Australian economy as a result of 10% base tariffs. However, China is key for Australia and they have been hit hard for now, though again, we suspect the current levels will be a starting point.
