The White House has implemented 104% tariffs on China as retaliation for China’s 34% duties on US exports. The tariffs will commence from Wednesday.
US equity markets have reduced some earlier gains. Gold price has fallen below $3,000, although it remains up by 0.27%, while the US Dollar Index (DXY) dipped 0.34% to 103.11.
Understanding Tariffs
Tariffs are customs duties intended to make local industries more competitive by providing a price advantage. They differ from taxes, which are paid at the point of sale and imposed on individuals and businesses.
Supporters of tariffs argue they protect domestic industries, while opponents warn they may increase prices and provoke trade conflicts. Donald Trump intends to use tariffs to bolster the economy and support American producers, focusing on Mexico, China, and Canada, which together represented 42% of total US imports in 2024.
In this timeframe, Mexico was identified as the leading exporter to the US, with exports valued at $466.6 billion. Trump plans to leverage tariff revenue to reduce personal income taxes.
Following the most recent announcements from Washington, we’ve seen a quick response in broader financial markets. Measures introduced by the White House bring trade duties on key Chinese goods up to levels not seen in decades, effectively more than doubling previous rates. The context behind this sharp escalation is clear: a counter-response to prior restrictions imposed by Beijing.
For traders, timing is all. With the change taking place mid-week, there’s limited chance for market participants to reposition without absorbing some volatility. The S&P 500 had climbed earlier, fuelled partly by strong earnings and a pause from the Fed, but those gains have begun to fade. Indices are not collapsing, but they’re softening under the weight of fresh uncertainty.
Gold’s retreat below the 3,000-dollar threshold—despite a small net gain for the session—indicates that hedging flows are not rising as one might expect. That tells us there may be no full consensus on how wide these trade shocks will spread. The modest dip in the dollar index confirms the lack of a clean defensive play here. Currency positioning remains cautious, leaning slightly away from the greenback for now.
Tariffs serve as a tool—not a tax at the till, but a charge on foreign-made goods at the border, placed with the intention of giving home-grown products a leg up. It’s not quite protectionism by name, though critics label it so. We should think less about intent and more about effect: rising input costs, disrupted supplier networks, and ultimately more complex pricing structures for producers and consumers alike.
Economic Strategies and Trade Negotiations
Trump’s team are signalling a wider move to shift the tax burden from income to imports—possibly putting more disposable income back into the pockets of citizens while making foreign goods dearer. The logic is simple: grab revenue from overseas sellers, then use it to lower taxes at home. That drive is politically palatable, especially with voters concerned about loss of manufacturing jobs.
Mexico retains the top seat as America’s biggest trading partner, with hundreds of billions flowing north annually. While China remains in sharp focus, duties on Canadian and Mexican imports are also on the radar, albeit as leverage in separate negotiations. Strength in bilateral numbers gives those relationships more insulation than others, but they are far from immune.
Looking at positioning, we’re likely to see option pricing on industrial and technology names adjust quickly, especially those heavily exposed to supply chain shifts. Traders should be anticipating wider spreads and lean towards protection where near-term earnings might reflect margin pressure. Put-call ratios already suggest a tilt in hedging. It’s not market stress—yet—but the bid for downside coverage is noticeable.
We don’t expect immediate resolution. Economies of this scale don’t settle disputes in days. Instead, price swings could widen around key data releases and policy meetings. Rate differentials remain supportive of a relatively stronger dollar long-term, but temporary dislocations in commodities and high-beta equity names are going to offer opportunity for the well-positioned.
Rather than betting on snap reversals, caution favours those adapting to a slower grind of divergence between trade partners. This isn’t a flash headline—it’s a structural shift. Keep positions sized appropriately.
