While investors were hoping for the deadline to be postponed or concessions to be announced, Trump has dismissed any talk of a postponement so far. He has, however, praised trading partners for coming forward to make concessions while brushing aside some offers, including one from Israeli Prime Minister Benjamin Netanyahu to bring down barriers and erase a trade surplus with the US, Menon notes.
On the morning of April 9 (Singapore time), Trump announced that he will slap another 50% tariffs on China, bringing the total tariffs imposed on the latter to about 104%.
China has previously said that it will not back down with Beijing saying that it is prepared to “fight to the end”.
“A major trade war between the US and China will not be best piece of news for markets in the short term. The two superpowers may eventually strike a truce, but with strong leaders in both the US and China, a truce may not be imminent,” says Menon.
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Other events include the weakening of China’s offshore yuan and Trump’s plans to impose sectoral tariffs on semiconductors, pharmaceuticals, copper and lumber, which will add “another layer of economic and geopolitical uncertainty that could rattle markets”.
What should investors do?
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At this point, investors will need to tread carefully in the short term until there is clarity. Otherwise, markets are expected to remain volatile with more downside in the short term.
That said, investors with the risk appetite and patience should continue to focus on medium-term prospects, says Menon. After all, “the abundance of liquidity on the sidelines is also a supporting factor for markets”.
Investors should also “manage risk by keeping a diversified portfolio and time-diversifying fresh investments through dollar cost averaging,” Menon adds.
While the analyst is not forecasting a recession for now, he warns that the global economy could slip into one if the new US tariffs remain throughout 2025 with retaliation from foreign countries.
However, he also believes that the US’s reciprocal tariffs may be rolled back following “tough negotiations” while the 10% baseline universal tariff remains.
“The uncertainty will play on investors’ minds and keep them on edge,” he says.
