Markets Brace for Trump's "Liberation Day"

The biggest round of tariffs looms with even the White House sending conflicting signals, keeping markets jittery.

Upcoming Tariff Onslaught

Markets are nervous in the days ahead of "Liberation Day" on Wednesday, when US President Donald Trump has vowed to impose a series of new global and country-specific tariffs. It marks the continuation of the trade wars that have been blamed for the stock market declines since mid-February. Trump's promise to impose auto tariffs contributed to the latest downturn on Friday, with the benchmark S&P 500 falling over 2% and recording its worst single-day performance since 2022, while gold hit a new all-time high. Tech giants that had been leading the stock market higher over the last two years fell by 3.5% on Friday.

On Wednesday, April 2nd, more Canadian and Mexican goods will be hit with a 25% tariff, which includes those covered under the USMCA agreement that have been given a reprieve. The other measure on which there is more clarity is the application of a 25% tariff on imported cars and car parts. Trump also promised to put a tariff on "external" agricultural goods, but no percentage was given. In a novel twist, "secondary" tariffs of 25% are meant to be applied to countries that buy oil and gas from Venezuela, but it isn’t clear how that would be enacted or what goods would be targeted. The policy that is perhaps the least clear is the one with potentially the most reach, which is the "reciprocal" tariffs outlined by US Treasury Secretary Scott Bessent, which would apply tariffs against countries that have imposed tariffs on the US. Just how much and what kind of policies will be included as tariffs that need reciprocation hasn’t been made clear.

Potential Reprieve Amid Uncertainty

Despite the hard rhetoric surrounding the tariffs, the White House has also signalled potential for reprieves, with even the Vice President and Chief of Staff reportedly unsure of what exactly will be announced on Wednesday. It seems that the Administration is seeking ways to implement the measures without spooking markets, with Trump himself saying he would give many countries "breaks" and that the measures would be "somewhat conservative".

As for the potential market reaction, it is even more uncertain. While pessimists fear it might trigger a rout leading to a recession, and optimists argue it could provide a relief rally, analysts suggest the results will likely fall somewhere in between. Markets dislike uncertainty, and the reaction could even depend on how the tariffs are presented, such as a strong implication that no further tariffs will be forthcoming. Ironically, the auto tariff that caused the recent downturn – the one applying to autos – could have the least effect, as it was spelt out in last week's executive order. This means German automakers like BMW might have a better chance of a relief boost if Trump softens the tariffs.

BMW Potential H&S Could Support Upside

In the aftermath of a golden pocket retest at 65 EUR, BMW hovers around the 75 level following an impulse off the low towards 90. A potential continuation of the trend could extend near 100 to form the right shoulder of a possible head and shoulders pattern. The peak at 115 could signal a bearish reversal once the shoulder forms, leading to the breakdown below the neckline. However, if prices fail to move higher in the short term, losing the support prematurely would expose the 57 and 45 levels, ultimately paving the way for a full reversal.

Source: SpreadEx / BMW

Key Takeaways

The upcoming Trump tariffs have cast a cloud of uncertainty over markets, with even the White House sending mixed signals. However, potential reprieves offer a glimmer of hope. The true impact remains to be seen as the details and implementation of measures remain unclear. But as the "Liberation Day" nears, investors will closely watch for any surprises or softening of the proposed tariffs.