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Inflation will run “HOT” in the second quarter of 2025 once President Donald Trump imposes “reciprocal tariffs” on what he's dubbed "Liberation Day" on Apr. 2, warned a leading analyst on X (formerly Twitter) on March 30.
President Trump has dubbed Apr. 2 the “Liberation Day,” when he will impose tariffs — as high as 25% — on imports from all countries that tax U.S. exports.
The tariffs will impact imports worth more than $1.5 trillion by the end of April. The sectors most likely to be affected are automobile, pharmaceutical, and semiconductor.
The Kobeissi Letter, a popular commentator on the global markets, cautioned that tariffs tend to shift price hikes to customers, which will lead to inflation in Q2 2025.
The U.S. Economy Policy Uncertainty Index (5-day moving average) recently exceeded the previous high it reached during the COVID-19 lockdown. It is nearly 80% higher than the uncertainty level the market witnessed during the Great Recession in 2008.
It will mark the “biggest escalation of the trade war to date,” and markets are in for a wild week, the analyst added.
The The Kobeissi Letter highlighted how market volatility ahead of the Liberation Day has led to consumer sentiment falling to 57 — a level we last noticed during the 2008 recession.
U.S. stock indices already extended losses on March 31 ahead of the Liberation Day. The S&P 500 was down 0.8%, the Dow Jones Industrial Average (DJIA) was down 0.3%, and the Nasdaq Composite was down 1.7%.
In contrast, gold is hitting record highs as gold exchange-traded funds (ETFs) have seen a net inflow of $12 billion over the last two months.
The tariff war has not spared the crypto markets either, which are down 1.3% over the last 24 hours.