Location, location, location

Starting April 5, every country shipping goods to the U.S. will face a 10% blanket tariff, enacted under the International Emergency Economic Powers Act. But that’s just the opening bid.

Then comes the real sting: as of April 9, a reciprocal tariff regime kicks in. Roughly 60 nations with significant trade surpluses against the U.S. will see steeper, tailored duties — while all other countries stay on the baseline 10% rate.

Translation? The global trade order just got rewritten. The U.S. is weaponizing deficits — and the market will need to quickly sort the winners from the losers.

Location, Location, Location. That’s the name of the game on President Trump’s “Liberation Day.” The headline might scream universal tariffs, but the fine print tells a story of clear geographic winners and losers. The U.S. has rolled out a sweeping tariff regime — a 10% baseline duty on all countries starting April 5, followed by reciprocal tariffs targeting 60 key trading partners from April 9. But not everyone’s getting whacked the same way. Canada and Mexico have dodged the worst of it — at least for now — while others are looking at eye-watering levies.

For traders, it’s clear: this isn’t a bluff. China gets hit hardest, facing a brutal 34% duty, on top of the 20% hiked earlier this year. Vietnam and Cambodia? Try 46% and 49%. Meanwhile, the EU gets a 20% slap, but whispers out of Brussels suggest they’ll try to negotiate it down before launching a full counterstrike. Don’t hold your breath — retaliation packages are already on the draft desks in Berlin and Paris.

This is not a stacked tax regime, but it’s layered. The White House confirmed these reciprocal and baseline tariffs won’t stack on top of existing sectoral levies — meaning steel, aluminum (25%), and autos (25%) still stand on their own. But with potential duties still hanging over microchips, pharma, lumber, and copper, we’re not done yet. The average effective tariff rate on U.S. imports is now surging above 23%, more than double the previous working assumption in most macro models.

The macro drag is real. With this announcement, growth desks will be busy slashing U.S. real GDP forecasts again. Many had already trimmed 2025 growth to around 1.7%, and that now looks optimistic. Inflation? It’s about to get another leg higher — think electronics from Asia, pharma, industrial inputs — a perfect storm for the Fed.

Speaking of the Fed — it’s officially stuck in no-man’s-land. Growth is slowing, inflation is spiking, and the street is already pricing a rate cut pivot by early fall. The FOMC may try to talk tough, but real yields are doing the talking now. We’re seeing 7 bps down on the 10-year to 4.06% — classic risk-off.

For Canada and Mexico, it’s complicated — but manageable. Both countries are spared reciprocal tariffs for now, though they remain exposed under IEEPA to 25% duties on non-USMCA goods. But for USMCA-compliant exports, it’s effectively tariff-free once paperwork clears. That means Canada’s average tariff burden only rises by ~7 ppts, and for Mexico, it’s a similar story. Add in exemptions for energy, potash, and critical minerals, and it’s a relative win — expect CAD and MXN to trade with a relief bid in the short term.

Markets hate what they see. S&P 500 futures are down nearly 4%, Nasdaq off almost 5%, and the Russell 2000’s getting smoked — the small-cap benchmark most exposed to domestic price shocks and supply chain disruption. This is not a drill — it’s full-blown de-risking. Gold is pressing into ATH territory, and oil, well, just as expected, it is taken note of “Liberation Day “ as “Correction Day.” Simply put, lower US growth is entirely incompatible with higher oil prices

Bottom line: This is a coordinated tariff strike on most of the global economy — and the market reaction is justified. The U.S. has torched what remained of multilateralism and opened the door to retaliation from multiple fronts. Keep an eye on policy responses from Brussels, Beijing, and Tokyo, but also watch for the Fed's next move — the pivot clock is ticking.