President Trump’s tariff announcements caught markets by surprise despite enough forewarning on the event, as nobody had grasped until the announcement, what the US administration is really trying to achieve with this move.
It’s not about tariffs although the nomenclature says “reciprocal tariffs” – its about rectifying US’ trade deficits with most countries it trades with. Outsized disincentives for US consumers to import is aimed at re-shoring manufacturing back into the US.
Expect US to continue pushing for re-shoring of higher value added products back home and friend-shoring lower value added products to preferred trading partners – that’s what these reciprocal tariffs finally aim to achieve.
This will have profound implications on global supply chains and most businesses will likely be on pause mode on any new projects /investments until they have a clearer idea of what the long term model will finally look like.
Expect markets to likewise continue pricing in uncertainty across vulnerable sectors.
Domestic focused sectors with low threat of imports (like banking, financial services, several consumer related sectors) will likely be preferred over globally exposed sectors.
Stock specific opportunities can come into play in globally exposed sectors including auto ancillaries, pharmaceuticals, electronics, chemicals as new global supply chains get drawn up.
Don’t expect markets to run up sharply for some time –have at least a 2 year perspective if you are considering fresh equity investments at this stage.