Following US President Donald Trump’s‘Liberation Day’ last week, a 10% baseline tariff on all nations took effect on5 April, followed by higher levies on approximately 60 countries that kicked intoday. This includes a 20% tariff on all goods imported from the European Unionand hefty tariffs on several imports from Asia Pacific countries, such asCambodia and Vietnam, representing a substantial blow to these export-orientednations.

104% Tariff Imposed on China

Trump followed through on his threatsto impose an eye-watering 104% tariff on Chinese goods as the two largesteconomies of the world edge closer to an all-out trade war. This back-and-forthexchange started in February after Trump enacted a 10% tariff on Chinese goodsdue to concerns regarding fentanyl-related trade. Another 10% levy was imposedin March, followed by last week’s 34% reciprocal tariff, and another 50% todayafter China declared it would ‘fight to the end’ and refused to remove its 34% countermeasureswhich were enforced recently.

Tariffs Shake Equities and Bonds

Risk assets have plunged today. Equitymarkets in Asia finished the session down across the board. Japan’s benchmarkindex – the Nikkei 225 – recorded losses of nearly 4.0%, which wiped out mostof the previous day’s recovery gains.

As the saying goes, a picture is wortha thousand words. The weekly chart of the Nikkei 225, shown below, illustratesthe precipitous decline observed in Asia, which has recently reached bearmarket territory and refreshed lows not seen since late 2023. Although priceaction is technically within striking distance of well-defined support at30,731, another support zone worth watching is between 28,413 and 29,447, abase predominantly composed of Fibonacciratios and a potential AB=CD support (100% projection ratio).

European equity markets also opened underwater today, and global bonds havefallen sharply. Longer-dated US Treasury yields surged across the curve; thebenchmark 10-year yield climbed as high as 4.51%, with the 30-year yieldbreaching 5.00%. While Treasury bonds are often regarded as a safe-haven assetduring market turmoil, the recent sell-off could indicate a potential shift inthe ‘safe-haven regime’ amid current heightened uncertainty.

Since Trump announced tariffs earlier this month, the S&P 500 has lostmore than 12% and is on the doorstep of bear market territory from the all-timehigh of 6,147. The Cboe Volatility Index (VIX)also remains at elevated levels around the 30.00 region. The daily charts belowshow that the S&P500 continues to shake hands with technical support between 4,892 and 4,960.While equity bulls have attempted to make a show from this region – when theVIX reached familiar resistance between 37.00 and 35.00 – technical resistanceoverhead at 5,190 proved too much to overcome as sellers faded the zone amidtariff escalation. The next layer of supportI am watching is between 4,497 and 4,637.

What Next?

The issue with the tariffs is that it only takes one announcement from Trumpor a major trading partner to send markets in either direction, making tradingchallenging. For instance, a rumour surfaced on Monday that Trump wasconsidering a potential 90-day reprieve, underpinning a bid in stocks. However, this rallywas short-lived after the White House debunked the story.

As of now, China is the only country that has retaliated and could implementadditional countermeasures following the 104% levy currently in effect. Thereal question is how long this will continue and whether deals will be reached.Trump has recently stated that his team is currently ‘dealing with manycountries’.

In my opinion, it makes little sense to try to pick tops and bottoms at thispoint; the uncertainty level is just too high. With so many wheels turning atonce, time will tell how this all plays out.

Written by FP Markets Chief MarketAnalyst Aaron Hill

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