Global equity markets collapsed overnight, with the shock of ‘Liberation Day, that tariffs materialised and were now a reality. Equities across Asia, Europe and the US crashed. The reaction was predictable, with many forecasting an extended global trade war and surging inflation. This is unlikely, as most US trading partners will buckle under the pressure and agree to cut all tariffs. The outcome would thus be a net positive for global trade. The bravado and threats of retaliation come mainly from the EU and China, but this ‘bark’ will be much worse than the ‘bite’. Many Asian Countries are already hurriedly arranging tariff-free agreements with Washington, as the White House phone runs red-hot! The US Dollar was slammed on the news, with the EUR surging above 1.1100, while the GBP leapt above 1.3100.Commodity currencies were beneficiaries of the floundering reserve, with the NZD powering above 0.5800, while the AUD jumped back above 0.6300. The trade exposed Australasian Countries fared pretty well, suffering a meagre 10% tariff levy. This is the very minimum and is largely a positive, which can be erased entirely, with the correct approach. The best outcome would be to eliminate all tariffs globally, which is Trumps ultimate goal of Liberation Day, I am sure.
