Wall Street slid as Trump doubles down on reciprocal tariffs

·       But tense-looking Trump may sound less hawkish on Liberation Day (April 2) as he wants trade concessions through extreme pressure tactics on tariffs

·       Gold wobbled but surged to a fresh LTH amid Trump tariffs and retaliatory tariffs coupled with Trump’s Iran warning and progress in Ukraine ceasefire

On early Thursday, March 27, 2025, Wall Street Futures recovered from the Trump auto tariffs panic low as Mexico, Canada and also other countries didn’t impose any retaliatory tariffs on US Cars in response to Trump’s 25% auto tariffs on March 26, 2025, especially by the EU, China, Canada and Mexico. Also, Mexico may not opt for big 25% retaliatory tariffs on US autos as 25% Trump auto tariffs on Mexican autos may not affect Mexican auto exports to the US significantly. There was also a report that Trump may flexibly launch two-phased reciprocal tariffs or even scale back some of his hawkish narratives. The market is still expecting a less hawkish Trump trade war tantrum amid nervous-looking Trump amid an increasing probability of Trumpflation and Trumpcession.

But late Thursday, Wall Street Futures again stumbled on lingering Trump trade war uncertainty as the Liberation Day on April 2, 2025, is approaching very soon. Eventually, US stocks closed lower Thursday on renewed concern of an all-out Trump trade war and Trumpcession. The S&P 500 edged down 0.3%, the Dow Jones lost 155 points, and the Nasdaq 100 slumped by over 0.5%.

Trump's decision to impose a 25% tariff on imported cars, effective in April, heightened fears of escalating trade tensions, particularly with key trading partners like the EU and Canada. Automaker stocks took a hit, led by General Motors (GM), and Ford for the Mexican production base, but Tesla gained 0.4%, benefiting from its domestic production, although after Trump tariffs, US-made automobiles including Tesla will be costlier significantly for Trump tariffs on automobile parts and accessories.

Trump may get trade concessions rather than retaliations and sound less hawkish on April 2 Liberation Day

Fast forward to early Friday, March 28, Wall Street and also EU futures got some boost after a report that the EU may be planning some concessions for US/Trump to avoid an all-out trade war. EU now wants reconciliations rather than protracted trade confrontations. Also, trump is now looking nervous and sounding less confident after seeing adverse reactions on both Wall Street and Main Street. But tense-looking Trump is still waging a war of attrition and his pressure tactics are also working. Almost all trading countries, blocks including the EU, Canada, Mexico, Japan and India are ready to give Trump some concessions and even China is sounding less hawkish on Trump's retaliation.

On March 28, 2025, the European Union’s latest comments regarding Donald Trump’s tariffs, specifically in the context of a concession offer, centered on efforts to mitigate the impact of U.S. reciprocal tariffs set to escalate after April 2, 2025. According to a Bloomberg report p, the EU was actively identifying concessions it was willing to offer the Trump administration to secure the partial removal of U.S. tariffs already affecting EU exports. This development came as a response to the looming threat of broader tariffs, with EU officials acknowledging during meetings in Washington that week that avoiding new auto and reciprocal tariffs, due to launch the following week, was unlikely.

The EU’s stance, as reflected in these discussions, was not explicitly detailed in public statements from top officials on March 28 itself, but the Bloomberg report suggests a strategic shift. EU officials were reportedly told that the Trump administration viewed these tariffs as an opening move in trade negotiations rather than an endpoint, prompting the EU to prepare a “terms sheet” of potential concessions.

This suggests a pragmatic approach, balancing the need to protect EU economic interests with the reality of U.S. tariff pressure. The report highlights that the EU was engaging in talks to define what a deal to reduce these tariffs might entail, though specific concessions—like adjustments to car tariffs or other trade barriers—were not publicly itemized on that date.

Earlier in March, European Commission President Ursula von der Leyen (VDL) had framed the EU’s broader position, emphasizing that tariffs were detrimental to both economies and that the EU would respond proportionately—evidenced by prior announcements of €26 billion ($28 billion) in countermeasures targeting U.S. goods, set to begin in April. However, the March 28 concession offer signals a pivot toward negotiation over escalation, aligning with other reports noting the EU’s intent to soften the blow of Trump’s policies.

In summary, on March 28, 2025, the EU’s latest comments—implicit through its actions reported by Bloomberg—revealed a willingness to offer concessions to the Trump administration to ease tariff burdens, marking a tactical shift amid ongoing trade tensions. This was less about public declarations and more about behind-the-scenes diplomacy (back channel talks/negotiations), as the EU braced for Trump’s next tariff salvo.

On March 28, 2025, European leaders expressed strong opposition to President Donald Trump's announcement of 25% tariffs on imported vehicles and parts, set to take effect on April 2. Spanish Prime Minister Pedro Sánchez urged the U.S. administration to reconsider these tariffs, labeling them as "nonsense" and advocating for dialogue with the European Commission to resolve the dispute amicably. The European Commission announced preparations for a "robust, calibrated" response to the U.S. tariffs. However, internal divisions have emerged among EU member states regarding the scope of retaliatory measures. France, Ireland, and influential European farming unions are urging the Commission to exclude numerous food and drink items from its proposed countermeasures, highlighting the challenges in formulating a unified response.

The EU Plans a 'Terms Sheet' of Concessions for Trump Tariff Talks

The European Union has identified concessions that it is willing to make to Trump's administration to secure the partial removal of US tariffs that have already begun to hit the bloc's exports and will increase after April 2. According to people familiar with the talks, EU officials were told at meetings in Washington this week that there was no way to avoid Trump's new auto and so-called reciprocal tariffs, which will go into effect next week. Discussions also began about the specifics of a potential reduction deal.

On Friday, March 28, 2025, Trump said:

·       My preference is to work things out with Iran; otherwise, it will be very bad for Iran.

·       Will Continue Bombing Yemen For A 'Long Time'

·       I pardon three co-founders of the BitMEX crypto exchange

·       I've always loved Canada

·       I will be announcing pharma tariffs soon

·       I am willing to make deals on auto tariffs

·       Deals on averting auto tariffs would come later

·       Trump Pushes for Ukraine Minerals Agreement Despite Delays

·       Trump about call with Canada's PM Carney: We agree on many things, and will be meeting immediately

·       I spoke with Canada's Carney; the call was productive

·       I agreed to meet Carney after Canada’s election

·       I will follow through on Canadian tariffs

·       Trump on Carney: We had a good conversation. Things will work out well between Canada and the US.

·       We're making progress on Russia-Ukraine

·       I don't think Americans should buy cars now to avoid tariffs.

·       Trump asked if Americans should buy cars now to avoid tariffs: No.

·       Will "absolutely" follow through with tariff promise on Canada

·       Trump wants to push tax deduction on interest on US-made car purchases

·       We get along well with Greenland

·       We cannot let warships be passing around Greenland

·       Higher tariffs will hit German car makers and the entire German economy particularly hard

·       We're looking at reports of Iranian drones used in Ukraine

·       Iran is high on my list of things to watch. I told Iran they need to make a decision

·       Trump addresses telephone rally for Jimmy Patronis

·       We will pass the largest tax cuts in history

·       Trump threatens 'far larger' tariffs if EU and Canada unite to do 'economic harm' to the U.S.

·       Trump administration is considering allowing higher taxes on the rich

·       Indian tariffs are very brutal and they are very smart, but talks are going well and it should work

On Friday, Trump was asked about India and reciprocal tariffs

Question by an Indian journalist to Trump: How are the talks with India or tariff going on and what is the expectation from India how much do you want?

Trump answered:

“Well as you know Prime Minister Modi was here just recently and-- we've always been very good friends-- India is one of the highest tariffing nations in the world--you know that-- I know-- thank you for shaking your head but it's brutal--it's brutal-- they're very smart and he's a very smart man and a great friend of mine actually-- and we had very good talks I think it's going to work out very well between India and our country very--- very well and I want to say you have a great prime minister”

Trump said he and Modi are good friends. But that does not mean that he will give undue concessions to India. India has to cut its brutal tariffs on the US in line with US/global levels. On Friday, there was a report indicating India Considers Removing Tax on U.S. LNG to Hike Imports.

On Friday, Canada’s PM and the former BOE President Carney said:

·       If I win the April 28th election, my government will set up a trade diversification fund

·       The government will strengthen the security of ports to help stop the traffic of drugs such as fentanyl, as well as guns

·       The new trade diversification fund will have C$5 bln in funding

·       Canada's system of agricultural supply management will never be on the table in talks with the US

·       I will meet Trump

·       The talk with Trump was very cordial

·       Trump did not give any guarantees that he would back down on tariffs on autos, steel, and aluminum

·       Trump policies may slow growth, boost inflation in the US

·       It's not clear whether there will be new trade discussions between Canada, the US and Mexico (USMCA)

·       It's the preference of Canada that Mexico would be part of the discussions

·       Trump did not give any guarantees he would back down on tariffs

On Friday, Mexico’s President Sheinbaum said:

·       USMCA helps North America compete against China

·       We're in talks with the US to protect jobs in Mexico

·       Ford, Stellantis, and GM are affected by tariff

On Friday, Chinese state Media said:

·       China will certainly respond with countermeasures if the US insists on harming China's interests regarding the April 2 reciprocal tariffs

·       If the US wants to discuss cooperation with China, mutual respect is a prerequisite

On Friday, China President Xi said:

·       Foreign Firms' Investment Plays Important Role

·       China to remain, foreign investors, a favorite destination

·       China's door will only open wider to the world

·       foreign investors in China affected by geopolitics recently

·       China-US Relations Should Stay Stable, Healthy

·       US-China relations should stay stable, healthy

·       Xi calls on top executives to help 'uphold global order' as trade tensions with U.S. rise

·       China looks to deepen ties with Central Asia as U.S. trade tensions intensify

Tariff Revenue and Federal Debt:  Trump repeatedly stated that "tariff revenues will be used to reduce the federal debt." This suggests an intent to leverage tariffs as a fiscal tool to address national debt levels. But it will be eventually collected from US importers and consumers rather than exporters contrary to Trump’s External Revenue Service Agency.

Economic Growth: Trump claimed that "businesses’ returns will continue to drive unprecedented economic growth," implying that tariffs are part of a broader economic strategy to boost domestic business and manufacturing performance. However, the higher cost of production for US goods may eventually affect discretionary consumer spending and economic growth. On Friday, US Automaker Group warns the new Trump tariffs will increase costs on American consumers, lower the total number of vehicles sold inside the US, and reduce US auto exports.

Relocation of Companies: Trump also noted that "companies are relocating to the U.S. to avoid paying tariffs," highlighting a perceived incentive for businesses to shift operations domestically due to his tariff policies. Tariff Man Trump is using his Tariffs as an effective negotiation and threat tool to attract fresh private investment from not only the US but also from other countries to relocate their production hub to exploit the big US market; otherwise, they will face tariffs. But in today’s global supply chain, even Tesla needs Chinese or imported spare parts and accessories. Trump’s auto tariffs may cause a hike of around $7000-$10000 increase in US-made automobiles including Tesla, which can affect the affordability of US consumers.

Trump is insisting that regional & targeted tariffs on metals, automobiles, pharmaceuticals, semiconductors, lumber, and dairy products are for self-sufficiency and national security, but to become an efficient manufacturing hub, Trump has to ensure proper industrial and logistic infra to compete with mighty China.

Conclusions:

Trump may blink again and scale back or postpone reciprocal tariff implementations, at least partially to 1st July from 2nd April for ‘progress’ on BTA (bilateral trade deal) with various countries including China, India, Canada, Mexico, Japan, and the EU. It’s the US importers and consumers, who have to bear the brunt of higher tariffs, not the exporters despite the rhetoric of US ERS (External Revenue Service) to collect Trump Tariffs from exporters.

In such a situation, all targeted exporters may also stop shipping goods to the US and will eventually divert goods to other destinations. China has been preparing for such a moment for the last 20 years to reduce the US and Europe's dependency on trade amid never-ending geopolitical fragmentations.

Trump also realized that the Fed is not going to cut rates before June’25 and thus he may also postpone his reciprocal and country-specific higher tariffs till at least July’25. The dealmaker Trump is using tariffs and US consumption as leverage to make concessions in trade and also forcing various US/foreign companies to invest in the ‘Liberated US” under his ‘Golden Age’.

Tariff Man Trump often talks about China’s huge trade surplus of over $1 trillion globally and $300 billion with the US. This is because the US and other countries are using China’s manufacturing hub as a cheaper outsourcing to maintain the comparatively lower cost of living. China has efficient industrial and logistical infra on a huge scale. The US imported Chinese goods as a compulsion as it had no alternative either domestically or even externally. China is not forcing the US to buy its goods at gunpoint.

Trump has to compete with China by developing comparable industrial and logistical infra including high-speed railway networks across America. Trump can’t simply replace Chinese goods by imposing draconian tariffs and waging tech & cold war.

But Trump’s logic of reciprocal tariffs on countries like India is a good idea, although it may not be practical as India does not need US cars, pharmaceuticals, etc. In this way, Trump may also issue a threat to impose some restrictions like H1B visas or even special service tariffs on India’s IT service exports, which will eventually hurt India’s USD inflows in the form of company revenue and remittances.

Trump may be creating a trade war between the US and the rest of the world to Make America Great Again. Trump tariff tantrum may not only cause US stagflation but may also create a synchronized global economic slowdown and even an all-out recession just in 5-6 years after the previous cycle of Global recession triggered by COVID. Trump is not respecting his trade deal with China in 2020 and also the USMCA trade deal (FTA) with Mexico and Canada. Now Mexico may join BRICS, while the US may also exit from NATO.

Eventually, Trump’s trade and geopolitical policies are paving the way for China and Russia to consolidate their global influence and BRICS may become a NATO-like organization in the coming years. And Greenland may be the next geopolitical focus for the US, Russia and China as a potential hub for rare earth materials, other natural resources and also a strategic shorter global sea trade route.

More Tariffs, More Threats, and more retaliatory tariffs

The US may be downgraded by Global rating agencies like Fitch, S&P, and also Moody’s amid an increasing probability of a US government shutdown and debt limit drama coupled with stagflation or even an all-out recession amid Trump policy tantrums.

Overall, Trump may sound less hawkish on April 2 as all his tariffs will be paid by US importers and eventually borne by us consumers--Trump is already sounding less hawkish and conciliatory late Friday when boarding in Airforce One; one journalist pointed out about huge fall of Dow Jones by 700 points and Trump looked dejected.

Bottom line:

Trump may sound less hawkish on Liberation Day, April 2 about Reciprocal Tariffs; all proposed sectoral tariffs including auto and even metals may be postponed by three months to pave the way for intense negotiations and concessions.

Although Trump may announce pharma and other sectoral tariffs of 15-25% by 2nd April Liberation Day, he may defer the implementation day by at least three months to 1st July to keep the negotiation window open. Trump now wants some trade concessions and also kept the negotiation window open. And almost all major trading partners are now ready to negotiate with Trump after seeing the 25% auto tariffs tango. The EU and India are already discussing potential concessions for Trump to avoid an all-out trade war.

Trump is insisting on Sectoral & targeted tariffs on metals, automobiles, pharmaceuticals, semiconductors, lumbers, and dairy products; but he may postpone the actual implementation of the same as a negotiation tactic to get maximum concessions from trading partners including ‘Tariff King’ India and ‘Mini China, but worse than China’ EU. Trump is repeating that most of the US trading partners have taken advantage of the US for decades after decades about tariffs and other business regulations and ripped off the US. Now it’s time for the US to be liberated from such tariff bullying on Liberation Day April 2. Trump plans to impose reciprocal tariffs on such high tariffs in countries like India from April 3.

Market Wrap:

On Friday, March 28, 2025, Wall Street Futures tumbled on Trump’s trade war uncertainty as the so-called US Liberation Day 2nd April is approaching fast for the imposition of Reciprocal tariffs to return for the Golden Age of America. Also, stalled US core PCE inflation, surging US inflation expectations and plunging US consumer confidence dragged Wall Street for a potential Trumpflation, stagflation or even Trumpcession. Although the report for EU concessions briefly helped stocks, it was short-lived as Trump reiterated about auto and reciprocal tariffs in his public comments.

On Friday, the S&P 500 tumbled 2%, the Dow Jones slid 715 points, and the Nasdaq 100 plunged 2.7%. Tech giants led the decline, with Alphabet, Amazon, and Meta dropping over 4% each, and Microsoft fell 3% amid the concern of EU digital tax on US tech MNCs and Trump’s threat of tariffs on semiconductors. For the week, the S&P 500 and Nasdaq-100 lost over 1% and 2% respectively, booking their fifth weekly drop in six weeks, while the Dow declined almost 0.8%.

On Friday, Wall Street was dragged by communication services, consumer discretionary, techs, industrials, financials, materials, consumer staples, energy, selected healthcare, and real estate, while boosted by utilities. China trade-sensitive stocks like Nike, Boeing, Caterpillar and Apple also dragged the market.

Gold wobbled amid the Trump trade war, potential concessions by the EU, Iran and Ukraine war tensions. Gold closed around $3086- a new life time high after Trump issued a de-facto warning for Iran. Trump’s trade war policies are positive for USD and negative for Gold, but also vice-versa for retaliatory tariffs. Also overall, the Trumpflation and Trumpcession narrative is positive for Gold.

Weekly-Technical trading levels: DJ-30, NQ-100, and Gold

Looking ahead, whatever the fundamental narrative, technically Dow Future (CMP: 42300) now has to sustain over 42500 for a further rally towards 42700/42900-43200/43500 and 43700/44050 and 44250/44400-44500/44800 and 45000/45200-45300/45500 and even 45700/45800-45900/46000 in the coming days; otherwise sustaining below 42400, DJ-30 may again fall to 42000/41500-40900/39500 and 38700-36100 in the coming days.

Similarly, NQ-100 Future (19900) has to sustain over 20200-21050 for a further rally to 21300/21500-21700/21850 and 22050/22200-22350/22500 and 22700/23000-23300/23500 in the coming days; otherwise, sustaining below 21000, NQ-100 may again fall to 20900/20600-20400/20150 in the coming days.

Also, technically Gold (CMP: 3060) has to sustain over 3035/3065 and 3075-3100 for a further rally to 3125/3150-3200/3225; otherwise sustaining below 3065-3065-3045, Gold may again fall to 2990 and 2965/2925-2900/2880 and 2850/2835-2810/2780-2780 and 2745/2725-2695/2665 and further 2635/2600-2585/2560 in the coming days.