The tariffs announced last night have surprised financial markets with their magnitude. The graph reproduced below speaks for itself regarding the extent of the "reciprocal" tariffs announced, which bring us back to the highest tariff levels in the United States in over 100 years!
Chart : US Effective Tariff Rate (%)
Sources : BEA, Census Bureau, CE
This announcement is perceived by markets as negative for global growth, with a particularly sharp impact on the US and Asian countries.
Beyond the significant decline in stock markets globally, the most notable movement is undoubtedly the depreciation of the US Dollar against other currencies, with the exception of the Chinese Yuan.
This movement is accompanied by:
A rise in credit spreads (approximately a 5% increase today across most credit indices but 10% over the past two weeks).
A decrease in swap rates, particularly pronounced on the US dollar (-20 bps on 10-year swap rates), where expectations of lower short-term rates continue to rise, now ranging between a 0.75% and 1% reduction by the end of the year. Despite the inflationary pressure these tariffs will cause, markets anticipate that the negative impact on growth will be even more significant, and the Fed will prioritize economic support over the fight against inflation.
In the Eurozone, the movement in interest rates is noticeable but much more subdued (-7 bps on 10-year swap rates). In the Eurozone, the probability of a 25 bps rate cut by the ECB on April 17th has increased from 70% to 90%.
A significant rise in recession risks in the US for 2025, which is immediately observable through online betting.
Graph: Polymarket survey results for a recession occurring in 2025, i.e. :
(i) the NBER publicly announces a recession before the end of the year
(ii) And/or two consecutive negative quarters of GDP
Source : Polymarket
And despite this, short-term inflation expectations are rising in the United States:
This overall picture primarily reflects investor concerns and the high degree of uncertainty regarding the short, medium, and long-term consequences of this disruption to global trade rules.
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