The Two Weeks That Will Be (30 March 2025)

Normally, Non-Farm Payrolls and US ISM (Tuesday and Friday), Fed Minutes (Wed 9 April) and Inflation from the US and China (Thursday 10 April) would be the key moments to pick out for the two weeks ahead, along with a side order of the Australian interest rate decision and Japan’s bellwether quarterly Tankan survey on Tuesday. But we don’t usually have a hyperactive newly elected US President with means, motive and opportunity announcing global tariffs in one stage-managed social-media motion-picture access-all-areas live event, GET YOUR TICKETS NOW TO “LIBERATION DAY“, beaming into all good theatres on Wednesday 2 April.  

Or, possibly before. Or after. Now he has your attention he’s not going to lose it. He threw in some auto tariffs early, despite suggesting sectoral tariffs can come later, maybe to move the media cycle on from what he would dismiss as some incident involving a messaging app, maybe not. If you thought we had seen an almost indigestible amount of information in these first 70 days, wait until tariffs are slapped on everyone, all at once, on Wednesday (probably).

Or at least on 15% of nations that contribute most to the US trade deficit. Scott Bessent described these to FOX News as “The Dirty 15”. The WSJ has listed them for you:

And each will have a different tariff rate, depending not only on the tariff rate they charge the US, but also on, we are told, a whole host of non-tariff barriers.  

The key message from all of this is “reciprocity”. Not because trade experts will be poring feverishly over how the administration came up with the numbers but because this is the spirit of what it’s all about. You join his gang and you won’t be penalised; if you set yourself against him then the punishment will increase.  

This is not one and done. The tariffs will always be there whilst Trump is in charge, dialled up or down as each country decides if they’re going to play ball. Even if they are all cancelled, the fact they were slapped on so many all at once in the first place is enough to act as a deterrent, in Trump’s view. It’s often said that he is hard to predict because he’s not playing by the rules: the reality is that he is the one setting the new rules. 

The market has decided to approach all of this as if it were a one-off event risk, akin to a non-farm payroll data point or a Fed meeting. The VIX term structure has shown a near term spike for next Wednesday – see this chart from volatility fund manager Kris Sidial:

This fails to grasp that this is the beginning of the tariff story, not the end. It also fails to grasp the modus operandi of the current administration which makes up some of the details on the hoof, given the relative inexperience of its ministers in only the early days of the new term. Trump has the ability to staff 4,000 roles with his political appointees – this website keeps track of 800 of them – and he’s only just begun:

This suggests that “Liberation Day” will necessarily be followed by a series of sequels, with “Liberation Day Harder” and “Liberation Day with a Vengeance” set to provide the opportunity for clearing up any fallout from the initial premiere.

Except it’s not just Donald who is the star of his own movie. There are many other players joining the game and they have their own set of constraints and motivations.

• Canada’s Carney has now set the date for what he hopes will be his re-election (or rather his first election, given he’s never held elected office before). With just four weeks until Canada goes to the polls on 28 April, Carney has to time his tough guy response to perfection. He can fight fire with fire until it blows up with his electorate. 
• The EU is still leaderless. France can barely make a dent in its 112% debt to GDP ratio as unelected Prime Minister Bayrou had to ease off on fiscal consolidation; Germany’s coalition negotiations will not be concluded by Easter despite Merz’s optimism, as migration and tax cuts remain key sticking points; and von der Leyen might announce ambitious plans but she is still beholden to national parliaments (not least Hungary’s Viktor Orban). Even if the EU did suddenly pass all the legislation for the proposed EUR 800bn ReArm defencing spending plan, it takes time to get the money out the door. Italy will still be receiving its share of the EU’s Covid Recovery Funds next year, six years after it was agreed at a European Council meeting on 21 July 2020.  
• Australia has now called an election for 3 May. The result is likely to be a hung parliament, leaving yet another leader without a solid mandate with which to face Trump. 
• The UK has a government with a large majority but many of its decisions do not fulfil the mandate with which its MPs came to parliament. The UK Gilt market is once again balanced on a bed of nitroglycerin, as Bill Gross put it in 2010, except now the debt to GDP ratio is 100% rather than 65%. The UK has to play ball with Trump as it desperately tries to keep the show on the road. It will be for nought if there are any difficulties at Gilt auctions which take place Wednesday 2 April, Tuesday 8 April and Wednesday 9 April.

Meanwhile there have been protests on Copacabana beach in Brazil to back former president Bolsonaro over coup charges, curfews in an Indian city in Maharashtra after violence, months of anti-corruption protests across Serbia and massive demonstrations in Istanbul after the arrest of its mayor. Where Trump is operating at his most powerful, having just won an election, almost every other player is weak. 

Each player must now make their own decisions in the new game. Many are in a state of panic, with resilience low and the state so large, following the global pandemic. Japan has suddenly released details for the first time of its plans to evacuate its citizens from islands next to Taiwan in case of an emergency, no doubt in response to Trump casually reiterating a stance he has admittedly held for years, that “we have an interesting deal with Japan that we have to protect them, but they don’t have to protect us”. Trump is not the unknown quantity – everyone else’s response is.

Powell speaks on Friday. The Fed aren’t coming to the rescue this time. They can’t, at least not yet. Inflation could spike then plummet, all within a couple of years. The jobs data is becoming redundant as DOGE attempts to make more government workers redundant. All US data could start to be undermined as budgets and departments are slashed. Perception is becoming reality. The latest Michigan Consumer Sentiment survey showed two-thirds expect unemployment to rise in the year ahead, the highest proportion since 2009. Inflation expectations are rising, likely because the cost of living has had such a dramatic impact in the term in which Trump did not serve. All income groups are worried:

Markets are yet to reflect the increased potential range of outcomes ahead. We warned in The Year That Will Be that “The VIX will be above 20 more than it is below 15“. The brief spike in the VIX term structure ahead of Liberation Day shows the market is yet to wake up to the new reality. Gamma is still precariously low and along with all the tariff obsessions, earnings season begins again on Friday 11 April with reports from JP Morgan, MS, Wells Fargo and BlackRock.

Grab the popcorn and trim your risk levels. Yippee-ki-yay.