Provided by Paul Reid, Financial Journalist For Exness
Donald Trump’s 2025 tariffs are once again stirring global markets and injecting uncertainty into trading strategies. While Wall Street posted gains earlier this week on hopes of a delay or softening in trade measures, the broader sentiment remains cautious. Here’s a breakdown of how markets, investors, and policymakers are reacting—and what traders should keep an eye on.
The S&P 500 bounced nearly 2% on Monday as traders bet the White House might ease back on the scope of new tariffs. That optimism spilled over to Asia, where the Hang Seng and Nikkei saw modest gains. However, this rebound came amid falling US consumer confidence, with sentiment hitting a 12-year low. While markets may rally on hopeful headlines, the underlying mood reflects growing anxiety over economic fallout.
A central point of contention is who bears the brunt of Trump’s tariffs. Treasury Secretary Scott Bessent insists Chinese producers will absorb the impact. But former Treasury Secretary Larry Summers called that claim “ludicrous,” noting that US steel prices have surged by a third since the tariffs were announced. Higher input costs are likely to filter through to US consumers and businesses, affecting margins and spending patterns.
Investment banks aren’t buying the optimism. Goldman Sachs warned clients that tariffs are often used as negotiating tools, meaning the final rates could end up higher than expected. The firm says markets are underpricing the risk of a drawn-out tariff war—and that elevated volatility is likely to persist.
As risk jitters rise, the US dollar continues to attract safe haven inflows. During previous trade wars, the dollar appreciated sharply, and we’re seeing echoes of that trend in 2025. As long as other economies appear more vulnerable to trade shocks, the greenback stands to benefit.
On the international front, the Australian Treasury downplayed the impact on its economy, predicting only a slight drag on GDP and minor inflationary pressure. Still, with global supply chains as interconnected as they are, no country is entirely insulated from US trade policies.
Volatility is likely to spike around key tariff announcements and deadlines. Look beyond the headlines and focus on sector-specific exposure—industrials, consumer goods, and tech.
For those trading currencies, expect USD to stay firm as long as uncertainty dominates. Watch inflation data and Fed commentary closely—if the Fed holds rates steady or even tightens to counter tariff-driven inflation, that’s another tailwind for the dollar.
