Markets on high alert ahead of Trump’s tariff plan reveal

Financial markets remained volatile on Wednesday as global investors inched closer to getting some clarity on U.S. President Donald Trump’s tariff plans.

For weeks, Trump has pegged April 2 as “Liberation Day”, when he plans to impose an array of new tariffs that could upend the global trade system with big implications for corporate earnings, global growth, inflation and Federal Reserve interest rate policy.

A person familiar with the administration’s deliberations told Reuters the tariffs are expected to be significant, hitting a wide range of countries, including close allies.

Investors had kicked off the year with high hopes for pro-growth policies from Trump but have been spooked by a barrage of tariff-related headlines.

While investors broadly agree the long-awaited announcement could be pivotal near-term for global financial markets, they are unsure about which way prices will swing and what will come next as negotiations could be protracted.

“I can’t recall a situation where the stakes were this high and yet the outcome was so unpredictable,” said Steve Sosnick, chief strategist at Interactive Brokers. “The devil is going to be in the details and nobody knows the details.”

Some investors acknowledge the heightened uncertainty and disruptions but do see it as short-term pain for longer-term benefits to U.S. manufacturing.

“Tariffs have the potential to be inflationary in the short term. None of these countries can go toe to toe. It’s going to be bumpy,” said Stuart Thomas, founding principal at Precidian Investments.

“But long term, I would not want to be betting against the U.S. dollar or the U.S.,” Thomas said, pointing also to the Trump administration’s energy policy and deregulation push.

U.S. stock indexes were slightly higher on Wednesday in choppy trade, after starting the session sharply lower. The S&P 500 was last up 0.22% at 5,642.93 after slumping as much as 1.1% to 5,571.48, earlier in the session.

“Markets have already priced in the worst scenario with regards to tariffs and there is a space for upside,” said Keith Buchanan, senior portfolio manager at Globalt Investments.

“However, this is just another example of markets being volatile and it could be some posturing or unwinding by investors,” he added.

Safe-haven gold held near record highs and European shares fell on Wednesday, with the STOXX 600 benchmark down 0.5%. The euro was 0.6% higher against the dollar at $1.0852.

On Tuesday, the White House said Trump will impose new tariffs on Wednesday, without providing details about the size and scope. Businesses, consumers and investors were fretting about an intensifying global trade war.

Lack of clarity on whether there will be one flat tariff rate or a more fragmented approach has made modeling the ultimate impact of the tariffs on earnings, growth and inflation a daunting challenge.

“The range of outcomes can be categorized as good, bad and the ugly. A good surprise would be if there aren’t as many tariffs or if they are more targeted and reciprocal,” said Brian Mulberry, portfolio manager at Zacks Investment Management.

“The bad would be if they are more heavy-handed in their approach, including sanctions, and the ugly would be if there is a 25% tariff across the board,” Mulberry added.

U.S. stock investors viewed Wednesday’s announcement as particularly crucial. In mid-March the S&P 500 confirmed a correction, a drop of 10% from a recent high. The index was last down about 8% from its February record high.

“We are at a very tenuous spot, being at the bottom of a corrective trading range ... that leaves us poised for either a very sharp bounce or a scary breakdown,” Sosnick said.

Heightened uncertainty over the tariff news and potential market reaction lifted the Cboe Volatility Index - an options-based measure of investor anxiety - to a more than two-week high of 24.80 on Monday. The index was up 0.2 point to 21.91 on Wednesday.

U.S. manufacturing contracted in March after growing for two straight months, while a measure of inflation at the factory gate jumped to the highest level in nearly three years as anxiety rose over import tariffs, survey data out on Tuesday showed.

Recent tepid consumer spending numbers have raised the specter of lackluster economic growth and higher inflation. That could make things uncomfortable for the Fed, which paused its easing cycle in January to monitor the impact of tariffs.

For Anthony Saglimbene, chief market strategist at Ameriprise Financial, the risk is that the announcement offers no clarity on tariffs.

“The market to some extent has discounted the cumulative negative effect of tariffs on potential economic growth and corporate profitability,” he said.

“The negative reaction in the market would be if the details of those tariffs still leave open a lot of questions about what it includes, who it includes.”

Some investors see the recent stock market dip as a buying opportunity.

“If you’re in the position to, this might not actually be a terrible time to add when prices are lower,” said Jim Worden, Chief Investment Officer at The Wealth Consulting Group.