Daily Analysis: Tariff Announcements Send Shockwaves Through Markets

Our daily analysis of EUR, GBP and USD.

DAILY ANALYSIS

USD

• Donald Trump’s announcement sent shockwaves globally, causing the Dollar and financial markets to tumble. He still plans to impose further tariffs on copper, microchips, and other key imported consumer goods.
• USD is currently 1.59% down against GBP and 1.78% down versus the Euro this week.
• White House officials reported that the US would impose a 10% baseline tariff on all imports into the US, set to take effect on the 5th of April.
• The baseline did not apply to Canada and Mexico since they have previously been targeted with 25% rates.
• China received a 54% rate.
• Countries like the UK, UAE, Saudi Arabia, and Colombia were among the few to face only the base rate.
• Countries like Bangladesh faced steep reciprocal tariffs, reaching 74%.
• The Financial Times reported that these tariffs were based on a deficit-to-import ratio. With a $6.2bn trade deficit and $8.4bn in imports, Bangladesh’s ratio was 0.738 (73.8%).
• The USD Index hit a year-to-date low as markets reacted to Trump’s tariffs, increasing expectations of Fed rate cuts. However, Fed policymakers have noted that uncertainty over Trump’s trade policies could keep interest rates higher for longer than expected.
• The US ISM Services PMI, measuring service sector activity, is set for release at 14:00 GMT, with a forecasted decline of 0.5 to 53.

GBP

• The UK’s hope of a free trade deal with the US was dashed last night when Trump’s baseline tariff of 10% included the UK.
• UK Prime Minister Keir Starmer states that he has not ruled anything out in response to this. However, they will stay calm, meet with industry leaders of affected markets and try to negotiate this tariff rate down in diplomatic channels with the US for the time being.
• GBP/USD moved to fresh highs above the 1.3150 level this morning.

EUR

• Trump announced a 20% reciprocal tariff specifically targeting imports from the EU to the US – which whilst expected, is 10% higher than the baseline tariff imposed on the UK.
• The single currency seemed to take the announcement in its stride as we saw the Euro gain against both its G3 counterparts and EUR/USD hit fresh highs above 1.09.
• Analysts suggest that the tariffs could lead to a 15-17% decrease in EU exports to the US, potentially contracting the EU’s GDP by approximately 0.4%.
• Traders are now pricing in almost 80% probability of a 25-basis point rate cut by the ECB in April to try and support what could be a struggling economy.

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