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President Trump’s announcement of 25% tariffs on cars and car parts not made in the US, as well as the threat of additional tariffs on the EU and Canada, could have a significant impact on the US and global economies.
Barclays global chairman of research Ajay Rajadhyaksha joins Catalysts host Madison Mills to share insights on how the market (^GSPC, ^IXIC, ^DJI) is digesting these tariff announcements.
To watch more expert insights and analysis on the latest market action, check out more Catalysts here.
Talk to me about how the market is digesting these latest rounds of tariff announcements. Do you think the market is ignoring a bigger risk, come April 2nd?
Yes. And uh, you're absolutely right. The market so far has been far more sanguine than we expected, even after the pullback in equities that we got in first quarter and especially overnight. I mean, the Mexican pesos really not moved very much. 5% of Mexican GDP is finished autos exported to the United States. If there's an actual 25% tariff going on, that maybe it takes, gets taken out. But right now, that's what the president says and the market does not seem to be reacting to it at all. And I'm not quite sure why. Maybe it is that the, the market thinks that this is the worst of it, that the reciprocal tariffs will be a nothing burger. Remember, the president did say that he was not going to impose reciprocal tariffs, that necessarily included all non-tariff measures. So, you know, that's the difference medicine between 2% and 25% tariffs on April 2nd. But yes, right now the market is very sanguine.
So what do you think investors should be doing right now? What would make more sense to you on the tape?
Be as defensive as possible, honestly. I, I know this is not a great message to have, but uh, we have pull back in equities, but we only pulled back about, you know, 6 to 7% on, on the S&P 500. Uh, as you mentioned in earlier in your forecast, we have a 5900 call on the S&P, that is in our baseline. But our baseline does not assume the worst case on tariffs. If you get a worse case, you do get a US recession. And then our bad case is 4400 on the S&P. That's a long ways to go lower. So we are as defensive as I can remember in the last two and a half years. That's what we're telling clients.