The new US tariffs, with a minimum of 10%, are set to take effect in early April. Some hope that international concessions might alleviate the situation, but recent actions suggest otherwise. Even Israel, which fully removed tariffs on US goods, was still subjected to a 17% reciprocal tariff. Market reactions have been swift—sharp declines in equities, falling interest rates, and a significant depreciation of the US dollar.

Asia Pacific Markets

Markets in the Asia Pacific region have experienced significant fluctuations due to the latest trade policies. Japan was hit with a 24% reciprocal tariff, causing the yen to strengthen as US yields dropped. The dollar initially rose but later declined to its lowest level since October, with further potential declines ahead.
Meanwhile, Australia received the minimum 10% tariff, while New Zealand faced a steeper 20% levy. Despite this, the New Zealand dollar outperformed the Australian dollar, which initially weakened but rebounded later in the trading session. Australian trade data showed a shrinking surplus, reflecting shifting trade patterns due to changing export and import trends.

European Markets

The euro surged against the dollar, climbing from nearly $1.08 to above $1.10. Positive economic data from the eurozone, including improved services and composite PMI readings, helped bolster confidence. Market expectations for a rate cut by the European Central Bank in April have risen significantly.
Meanwhile, the UK faces a 10% reciprocal tariff, half of the EU’s levy. Despite weaker PMI readings, the British pound has remained resilient, crossing the $1.30 mark for only the third time since November. Investors are now watching closely for upcoming economic data, including February GDP figures, which may provide further insight into the UK’s economic trajectory.

American Markets

The US dollar has suffered heavy losses in response to trade developments. The Dollar Index plummeted nearly 1.6%, hitting levels last seen in 2023. February’s goods trade balance, wider than expected, added to concerns. Businesses and households rushed to secure imports ahead of the tariff changes, leading to an increased trade deficit. These distortions are expected to affect broader economic indicators, particularly private domestic purchases. Meanwhile, attention is on upcoming economic data releases, including jobless claims and ISM services data, which may offer further insight into economic trends. Despite government and private-sector layoffs, unemployment claims have not yet reflected a significant impact, though analysts anticipate this could change in the coming months.