As the date for potential tariffs approaches, there has been notable movement in risk assets following reports that some countries might be exempt from Trump’s tariff list. Recent reports suggest that a two-step approach involving emergency powers and Section 338 tariffs is being considered, particularly regarding the auto industry, based on previous national security investigations.
Additionally, tariffs may be proposed to fund tax cuts, although implementing this would require congressional approval. The uncertainty surrounding these measures remains high, complicating predictions about their impact.
Goldman Sachs’ Cautious Perspective
Goldman Sachs has shared a cautious perspective, stating that initial tariffs could be higher than the expected 9% reciprocal rate anticipated for April. They estimate that the starting rate may be around 18%, indicating potential for unanticipated market responses.
Markets have already started adjusting to incoming developments, with traders attempting to price in the possibility of exemptions. The suggestion that specific nations might avoid new tariffs has introduced volatility, particularly in sectors that would be directly affected. With the auto industry under scrutiny, discussions around emergency powers and Section 338 tariffs indicate that policymakers are weighing multiple approaches rather than committing to a single framework. The decisions being made now will shape the immediate future for industries with global supply chains.
The notion that tariffs could be used to offset tax cuts adds another layer of complexity. While congressional approval remains a hurdle, the prospect alone has influenced sentiment. Investors are balancing the likelihood of such measures being passed against the broader economic consequences of trade restrictions. Given that prior national security investigations have already set a precedent, any escalation beyond current expectations could spark reactions across multiple asset classes.
Potential Market Reactions
Goldman Sachs’ projections regarding tariff rates highlight why caution remains warranted. If initial figures land closer to their 18% forecast rather than the expected 9%, this would represent a material deviation from prior assumptions. Such a move could prompt reassessments, particularly among those who had anticipated more moderate adjustments. Forward-looking strategies need to incorporate the full range of potential outcomes, especially considering that market positioning is already shifting ahead of official announcements.
