BY SAQIB IQBAL AHMED
NEW YORK- Global investors are close to getting some clarity on the Trump administration’s tariff plans on Wednesday, but with little detail on what to expect, financial markets remain on edge.
US President Donald Trump has for weeks pegged April 2 as a “Liberation Day” to impose an array of new tariffs that could upend the global trade system, but has provided few details.
Investors, who kicked off the year with high hopes for pro-growth policies from the Trump administration, have been spooked by a barrage of tariff-related headlines.
But while investors broadly agree that Wednesday’s long-awaited announcement could be pivotal for the near-term outlook for global financial markets, they are unsure about which way prices will swing.
“I can’t recall a situation where the stakes were this high and yet the outcome was so unpredictable,” said Steve Sosnick, chief strategist at Interactive Brokers. “The devil is going to be in the details and nobody knows the details.”
The White House confirmed on Tuesday that Trump will impose new tariffs on Wednesday, without providing details about the size and scope of trade barriers that have businesses, consumers and investors fretting about an intensifying global trade war.
White House spokeswoman Karoline Leavitt said reciprocal tariffs on countries that impose duties on US goods would take effect once Trump announces them, while a 25 percent tariff on auto imports will take effect on April 3.
Lack of clarity on whether there will be one flat tariff rate for all imports or whether the administration takes a more fragmented approach has made modeling the ultimate impact of the tariffs on earnings, growth and inflation a daunting challenge.
“Ideally, we just get one number and then we can figure out the downstream impact,” said Sonu Varghese, global macro strategist at Carson Group.
“But my fear is that we won’t get that, or even if we get one number that will be subject to negotiations,” he said.
Wednesday’s announcement feels particularly crucial after the S&P 500 confirmed a correction, a drop of 10 percent from a recent high, in mid-March.
The index was last down about 8 percent from its February record high.
“We are at a very tenuous spot, being at the bottom of a corrective trading range … that leaves us poised for either a very sharp bounce or a scary breakdown,” Sosnick said.
Heightened uncertainty over how the tariff news and potential market reaction lifted the Cboe Volatility Index – an options-based measure of investor anxiety – to a more than two-week high of 24.80 on Monday. The index finished Tuesday at 22.77.
“I think the market is really holding its breath,” said Mark Spindel, chief investment officer at Potomac River Capital LLC, who expects the so-called fear gauge to climb toward 30, a level associated with a high degree of risk aversion.
Traders in the options market were braced for a roughly 1.3 percent swing in the S&P 500, on Wednesday.
Apart from the US stock market’s immediate reaction, the tariffs announcement could also spur sharp moves in international equities, currencies, including the dollar and euro, and safe-haven gold.
