We’re in a new era with the Trump 2.0 government – early into the second year of the second administration, the tariff policy has been turned on its head, somewhat, by the US Supreme Court, also known as SCOTUS.
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SCOTUS late last week deemed that the legislation Trump has been using to impose tariffs so far is invalid for such a purpose, effectively meaning that Trump’s tariffs are ‘illegal.’
They’re illegal in the sense there’s no legislation to back them, not in the more overt sense that the US President has been staunchly punished for committing a crime, which isn’t really the flavour of consequence this decision is attracting.
And since the SCOTUS decision, Trump has used another piece of legislation to validate a new imposition of what is now a 15% global tariff, for everybody. It remains unclear what this means for other countries that have already inked lower-rate ‘deals.’
Our own government is basically in the middle of figuring out what, exactly, to do here.
As at 4.30pm AEDT, the US Customs department has said it will take a month, maybe longer, to figure all these new implications out; US Importers are still paying the tariff rates they were before the SCOTUS call. I covered all of that in a separate article for HotCopper here.
So, now that we’ve closed for the day and the US is soon to wake up and start trading, let’s take a lay of the land.
How have markets responded so far?
Well, the ASX200 didn’t like the news on Monday.
The XJO ended down sixth-tenths of a percent, but at least for now the ASX200 is still holding above the relatively-recently-met 9,000pts level.
Elsewhere, we don’t really know how much of Asia will react to the new plan.
While they had a good day over on the NZX that relatively small bourse was influenced by strong gains in the health tech space.
Watch for China reaction; most futes red
China and Japan were both shut on Monday, I’d wager that China’s stock market(s) reaction(s) to the new tariff policies will be most interesting when it comes to divining what any next step in the US-China trade war might look like.
Over in Korea, at least, the KOPSI hit a fresh record today, so there’s that.
Looking at futures as at 4.40pm AEDT:
- NASDAQ down -0.96% (Monday night Aus time)
- S&P 500 down -0.76% (Monday night Aus time)
- ASX200 futures flat +0.02% (Tuesday session)
- NIKKEI futures down -0.98% (Tuesday session)
- German DAX futures down -0.73% (Monday night Aus time)
- FTSE futures down -0.17% (Monday night Aus time)
Gold, predictably, looking stronger
One perhaps predictable winner from all of this is the price of gold, that great barometer of uncertainty and its effects on the psychology of the collective market.
Last week being somewhat rangebound at around the US$5,000/oz level flat; new tariff uncertainties have helped push gold back up above that ceiling, fetching US$5,155/oz a/a 4.35pm AEDT on Monday.
Silver followed up +5.6% back above US$85/oz, showing revived interest in the ‘silver satellite’ trade (where you accept in my metaphor that gold is the sun, which works.)
Those are just about the most obvious major moves to keep an eye on, though it’s also worth highlighting the price of Bitcoin has fallen below US$65,000 – that only happened after the tariff announcement, deepening a recent confidence crisis in the grandfather cryptocoin.
While it looks like a lot of liquidity has moved out of Bitcoin (and I have a hunch a sizeable portion of that outflow has gone into prediction markets), it’s clear there’s a psychological signal, there, when it comes to the crypto market.
What that thought process is, however, remains murky. But perhaps it’s simple as this: don’t buy now, wait to see what happens. In other words, the market’s feeling a little risk-off right now.
Oh, and the US hasn’t bombed Iran yet.
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