Global markets are bracing for the potential impact on trade and inflation as President Donald Trump prepares to announce sweeping tariffs in a much-anticipated press conference this afternoon.
The tariffs, which are set to target several major US trading partners, will be revealed later today, with Trump hosting a Rose Garden press conference at 4 pm ET.
While the tariffs may bring short-term political gains for the administration, analysts warn that the economic fallout may force a reevaluation of these bold trade measures in the months ahead.
Long-term sustainability in question
Analysts are divided on the immediate effects, but many share concerns about the long-term sustainability of the tariffs and the risk of escalating economic disruption.
Michael Brown, Senior Research Strategist at Pepperstone, expressed unease over the imminent announcement. "The day arrives amid a sense of dread, and perhaps even fear, as to the tariffs that might be announced."
Brown noted that while the specifics of the tariffs remain unclear, questions linger about whether VAT will be included in reciprocal tariff calculations and whether the US will impose a blanket tariff on most imports. He also warned that the announcement is likely to mark the beginning of another tumultuous trade saga rather than its conclusion.
"Once reciprocal tariffs are known, attention will rapidly turn to responses from those hit with levies," he said. "Some nations (e.g. Canada, China) will probably hit back with punchy rhetoric and retaliatory tariffs of their own; some (e.g. Europe) may impose some measures, but will probably make some concessions in an effort to seek the removal of reciprocal tariffs."
While Brown anticipates continued uncertainty and high volatility in global markets, Ipek Ozkardeskaya, Senior Analyst at Swissquote Bank, raised concerns over the economic impact of the tariffs. Ozkardeskaya pointed to recent economic data, including a slowdown in US manufacturing activity and rising inflationary pressures, which could be exacerbated by the tariffs.
"The problem is that the supply-side shocks tend to be inflationary – as we saw during the pandemic times," Ozkardeskaya explained. "The tariffs could disrupt the global supply chains and bring inflation back before giving the Fed time to reach its 2% target."
Another phase of volatility
The uncertainty surrounding the tariffs has already led to shifts in market sentiment, with investors flocking to bonds as a safe haven. Ozkardeskaya noted that US 10-year bond yields fell to 4.13% from a high of 4.80% in mid-January, while European government bond yields also eased. However, she emphasized that the tariffs could signal the start of another phase of volatility.
"It would be naive to think that today will mark the end of the tariff shenanigans," Ozkardeskaya said. "More likely, it marks the start of another phase of uncertainty and turmoil."
Nigel Green, CEO of deVere Group, took a more critical view of the tariffs, predicting that Trump’s high-risk experiment would ultimately backfire. He expressed skepticism about the long-term sustainability of the tariffs, suggesting that the White House would be forced to scale them back within six to 12 months.
"History teaches us that trade wars are easy to start but hard to win, and the early signs of strain are already visible across markets and boardrooms," Green said. "The sheer scale and pace of the tariff implementation risk choking global supply chains and hiking prices for US consumers."
Green also highlighted the negative impact on industries such as the US auto sector, which he warned could face a crisis if tariffs on imports are imposed. "The car industry’s intricate global web means any sudden spike in costs will reverberate quickly through jobs, prices, and production schedules," he added.
Despite the apparent chaos, Green acknowledged that Trump’s political instincts may ultimately lead him to backtrack on the tariffs. "The ‘America First’ rhetoric can only carry so far once voters start to feel the squeeze from more expensive cars, food, and consumer goods," he said. "Markets crave clarity, businesses need stability, and consumers demand relief from the very price shocks these policies create."