Morning wrap (09.04.2025)

Markets are reacting with another wave of sell-offs to the introduction of broad tariffs of 104% on imports from China, which officially came into force today, U.S. Eastern Time.

Hopes for a last-minute intervention from Beijing have vanished, confirming China's firm stance on Trump's aggressive trade policy.

U.S. stock index futures are down 2.00% today and approaching Monday's lows. The USDIDX dollar index is down 0.70%, while gold is gaining 1.20% to 3020 USD per ounce.

Indices from the Asia-Pacific region are recording losses of 1.50–3.00%, with the exception of Chinese indices, which are rebounding by 2.00–3.00%. However, the rebound is only visible in CFD contracts, as the cash indices are losing between 1.50–2.00%.

The People's Bank of China has once again set a lower domestic exchange rate for the yuan, pushing it to its lowest level since 2007. The PBOC has gradually allowed the yuan to depreciate in recent days, aiming to ease the impact of U.S. tariffs.

Trump announced that the long-anticipated tariff on pharmaceutical drugs is inevitable, calling it “crucial.”

Trump accused China of deliberately weakening the yuan to minimize the impact of U.S. tariffs. He believes this is part of Beijing’s strategy to maintain export competitiveness amid escalating trade tensions.

Bank of Japan Governor Kazuo Ueda took a cautious stance, indicating that the central bank is in a wait-and-see mode regarding the broader effects of the tariffs. Meanwhile, Japanese officials are preparing for direct talks with U.S. representatives in Washington.

The Reserve Bank of New Zealand (RBNZ) cut its key interest rate by 25 basis points to 3.5%, citing growing global uncertainty. The decision was in line with expectations.

Meeting minutes indicate that the RBNZ sees the possibility of further rate cuts if global trade conditions deteriorate. The ambiguous impact of tariffs on inflation was emphasized.

In response to the U.S. imposing a 25% tariff on imported vehicles and parts, South Korea announced a support package for its automotive industry.

South Korea reduced the car purchase tax from 5% to 3.5% until mid-2025 and raised EV subsidies from 20–40% to 30–80%, extending them until the end of the year. These measures aim to protect domestic car manufacturers and sustain demand.

Fitch Ratings estimates that the new tariffs could temporarily increase U.S. government revenues by as much as 800 billion dollars, raising the effective tariff rate to 25%. However, the agency warns that the long-term economic costs may outweigh these gains.

Fitch expressed concerns that higher import costs may limit consumer spending and business investment. This could slow overall economic growth.