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Investor risk appetite is expected to remain subdued in the near term, according to Hirofumi Suzuki, chief FX strategist and head of Treasury Research at SMBC.

• reciprocal U.S. tariffs fully in effect later today
• risk sentiment is likely to stay deteriorated

While talks to roll back some tariffs are underway, Suzuki cautioned that any meaningful progress is unlikely in the short term. The situation is further complicated by the emergence of countermeasures—including U.S. retaliation against China’s own retaliatory tariffs—which he said is exacerbating investor anxiety.

As a result, the Japanese yen could see further upside against the U.S. dollar.

• environment is placing upward pressure on the yen,
• USD/JPY could fall by another 1 to 2 yen by the end of the week

This article was written by Eamonn Sheridan at www.forexlive.com.

Trump is set to impose a 104% tariff on Chinese goods starting Wednesday at 12.01am US Eastern time.

• the 104% is serviced from his 545% tariffs on China plus his added 50% in retaliation for China’s placing of tariffs on the US

US journalist Charles Gasparino says Trump is pressing ahead due to advice he has received that “the tumult in on Wall Street in stock market, while significant, will not be matched by a similar tumult in the Main Street economy”.

This article was written by Eamonn Sheridan at www.forexlive.com.

The People’s Bank of China (PBOC), China’s central bank, is responsible for setting the daily midpoint of the yuan (also known as renminbi or RMB). The PBOC follows a managed floating exchange rate system that allows the value of the yuan to fluctuate within a certain range, called a “band,” around a central reference rate, or “midpoint.” It’s currently at +/- 2%.

The rate at 7.2066 is the weakest (for CNY) since September 11, 2023

The previous close was 7.3390

Earlier today I flagged that the PBOC would once again sit on the USD/CNY rate:

• Expectations are for another very heavy dampening of USD/CNY reference rate again today

They seem to be content at a slow burn devaluation rather than a big bang at this stage. China is likely holding the threat of a big bang devaluation as a negotiation tactic.

This article was written by Eamonn Sheridan at www.forexlive.com.

I posted on the weakness in AUD and NZd:

• AUD/USD and NZD/USD soft, US equity index futures also very heavy

Both have bounced 30+ points from their lows, with the euro performing very strongly indeed. How much longer before we all start to talk about EUR as an alternative reserve currency for the USD (it already is to an extent, but I mean more)?

We are approaching the CNY daily reference rate setting. I am expecting the PBOC to hold the line again today, which will take some pressure off for as long as a few hours 😉

• Expectations are for another very heavy dampening of USD/CNY reference rate again today
• PBOC is expected to set the USD/CNY reference rate at 7.3348 – Reuters estimate

This article was written by Eamonn Sheridan at www.forexlive.com.

AUD and Kiwi$ hit their lowest since 2020 a few minutes ago. KRW hit its lowest since 2009 vs. USD.

ES and NQ are off around 2%, extending their losses after a very heavy Tuesday.

Trump appears not to care too much, doubling down on the finger pointing:

• Trump says China is manipulating yuan to offset against tariffs

This article was written by Eamonn Sheridan at www.forexlive.com.

Japan finmin Kato:

• There is no preset standard on what is appropriate size of Japan’s foreign reserves

• Don’t think size of Japan’s foreign reserves is too big

• We hold foreign reserves in case we need to conduct FX intervention
• Won’t sell us Treasury holdings just from standpoint of US-Japan relations

This article was written by Eamonn Sheridan at www.forexlive.com.

At a minute past midnight, US Eastern time, on Wednesday (ie in just a few hours) I’ve little doubt that the new country-specific tariffs will come into effect, including the 104% rate on China.

Its going to be ugly.

But, perhaps there is a glimmer of hope that Trump will dial back his war on trade and economy.

I posted this earlier:

• Trump administration has moved to restore some terminated foreign aid programs

There was glee amongst MAGA at the ruthless cuts to aid, but it appears Trump has reconsidered the good that many of the programs do.

Yes, he is a stubborn man, but is this a sign that he’ll soon come around on tariffs, and dial them back? Real politik will, in the end, win out?

I expect it’ll still be some way off, and indeed, risk markets are continuing to be smashed here as I post. ES and NQ are still extending their losses.

Let me know your thoughts in the comments!

This article was written by Eamonn Sheridan at www.forexlive.com.

Goldman Sachs

• Continued tariff escalation between US and China presents a downside risk to our current 2025 full-year real GDP forecast of 4.5%

• Also points to significant policy easing by Chinese government in the coming months to mitigate impact and stabilize growth
• Will be further impact on China GDP from potential 50% added tariff from Trump

This article was written by Eamonn Sheridan at www.forexlive.com.

South Korea has announced emergency measures to support its auto industry in response to a 25% U.S. tariff on imported vehicles and parts, effective Thursday. The new tariff affects over $460 billion in annual trade and poses significant risks to Korean automakers, which export nearly half their vehicles to the U.S.

Key measures include:

• Increased policy financing to 15 trillion won ($10.2 billion) from 13 trillion won.

• Temporary tax cut on car purchases from 5% to 3.5% until June 2025.

• Expanded EV subsidies, now covering 30%–80% of prices (up from 20%–40%) and extended through year-end.

• Market diversification efforts, targeting growth in the “Global South.”

The government vowed to negotiate with the U.S. to ensure Korean firms are not treated unfairly and to support their global competitiveness. Hyundai Motor, meanwhile, committed to freezing U.S. prices for the next two months to ease consumer concerns.

Hyundai Alabama

This article was written by Eamonn Sheridan at www.forexlive.com.

Fitch downgrades six Chinese banks to A (from A+)

• Outlook Stable

The six banks are:

• China Development Bank (CDB),
• The Export-Import Bank of
  China (ExIm),
• Agricultural Development Bank of China (ADBC),
• Postal Savings
  Bank of China Co., Ltd. (PSBC),
• Standard Chartered Bank (China) Limited (SCBC)
• and United Overseas Bank (China) Limited (UOBC).

CDB, Exlm, and ADBC are ‘policy banks’ and their ratings are aligned with China’s sovereign rating. While Fitch says

• “t

  he sovereign rating downgrade indicates
  the government’s
  reduced ability to provide the same level of extraordinary
  support to the
  banks”,

• “Our expectation of a ‘Very Strong’ support
  propensity from the
  government for the three policy banks and PSBC remains
  unchanged.”

This article was written by Eamonn Sheridan at www.forexlive.com.

Trump administration has moved to restore some terminated foreign aid programs

more to come

This article was written by Eamonn Sheridan at www.forexlive.com.

Markets in Chaos: Navigating the Tariff Storm with Logic, Patience, and Perspective

“Things are rarely as bad — or as good — as most people think.”

This is not just a personal philosophy. It’s an investment filter — a reminder to resist extremes, step back, and see both the risks and the opportunities when everyone else is gripped by fear or greed. In 2025, this mindset is essential as the world finds itself in the throes of one of the most aggressive trade and policy shifts since the end of World War II.

The United States has moved from global trade leader to protectionist enforcer, unleashing a series of tariffs that have rattled supply chains, international alliances, and investor psychology. But while the headlines scream breakdown, I believe we’re entering a transitional moment — one filled with uncertainty, yes, but also opportunity for those who can keep perspective.

1. Global Trade Rewritten: What Just Happened

The sudden re-escalation of trade tensions has brought a wave of shock:

• The U.S. has layered tariffs on virtually all imports — including allies — with cumulative duties reaching 104% on Chinese goods.

• China responded with 34% tariffs and export restrictions on critical materials like rare earths.

• Even countries with free trade agreements (e.g., Singapore) are now facing non-reciprocal U.S. tariffs despite zero duties on American goods.

These developments are not incremental. They are transformative. The era of open markets — the framework that lifted millions out of poverty and drove record corporate profits over the past 40 years — is being actively dismantled.

2. Dalio’s Warning: The System Is Breaking Down

Ray Dalio has compared this period to the 1930s, when the global order broke down and economic nationalism surged. He sees three layers of disruption:

A. The Monetary System

• We’re reaching the limits of debt-driven growth.

• Inflation, rate hikes, and asset bubbles have made it harder to sustain the post-2008 expansion.

B. Internal Political Chaos

• Rising inequality and partisanship have eroded the social contract inside democracies.

• Economic stress is becoming political stress, with voters demanding radical change — even if it’s disruptive.

C. Geopolitical Realignment

• The post-WWII multilateral system (WTO, IMF, UN) is losing credibility.

• Unilateralism and power politics are replacing consensus-building.

“You win a war, you set the rules. That’s how it worked in 1945. But that system is now crumbling.”

Dalio doesn’t see tariffs as a cause — but as a symptom of something deeper.

3. The Bessett Doctrine: Power Politics in Trade

U.S. Treasury Secretary Scott Bessett doesn’t deny that the approach is harsh. But he frames it as a calculated move:

• “We export one-fifth to them of what they export to us. That’s a losing hand for them.”

• He claims over 70 countries have contacted the U.S. to renegotiate since “Liberation Day,” when the new tariff regime began.

This is classic negotiation-through-chaos, a strategy President Trump has used throughout his public career — escalate first, force reaction, then negotiate from strength.

Bessett believes:

• The imbalance gives the U.S. leverage

• The chaos is temporary

• The result will be better trade terms, even if the process is messy

But leverage cuts both ways, as we’ll see next.

4. Krugman’s Reality Check: The Math Doesn’t Lie

Paul Krugman delivers a sobering economic counterpoint:

• Today’s tariffs dwarf Smoot-Hawley, especially since the U.S. economy is 3x more trade-exposed than in 1930.

• Trade disruptions are not linear — damage grows with the square of the tariff.

• Krugman expects GDP hits worse than Brexit if tariffs persist.

He also highlights a flawed assumption at the core of the Trump policy: the obsession with bilateral trade balances.

“It’s like saying you run a deficit with your grocery store — they don’t buy anything from you. That doesn’t mean you’re getting ripped off.”

His concern isn’t just economic — it’s about unpredictability:

• Businesses can’t plan when tariff rates shift by 20% in a week.

• Investment freezes. Hiring slows. Confidence breaks.

5. China’s Calculated Resistance

China is not just an economic player — it’s a civilization with deep strategic culture.

Their response isn’t about just soybeans or iPhones — it’s about signaling:

• We will not be bullied.

• We will endure pain if it preserves sovereignty.

• We will not reward chaos.

China may believe it can absorb short-term damage more effectively:

• Its state control over banks, media, and companies gives it resilience tools the U.S. does not have.

• Its population is historically more tolerant of hardship in the name of national interest.

As one analyst quipped: “They’re willing to survive on rice if it means holding the line.”

6. Media Lens: The Real-World Cost of Tariffs

Journalists have captured the micro impacts:

• In Oxford, U.K. MINI factories are reeling from Trump’s 25% auto tariffs.

• In North America, food bank use is rising in towns hit by supply chain shutdowns.

• In Singapore, officials express disbelief at being punished despite running a U.S.-favorable trade balance.

At home, Americans are warned:

• “Look at your living room — your TV, your fridge, your phone. This is why this matters.”

• Tariffs are taxes. The burden eventually hits consumers, not just factories or stocks.

7. My Framework: Order Within the Chaos

Here’s where I stand: Yes, this is messy. But I see a controlled fire, not a forest fire.

President Trump wants a “win” to present to his base — whether or not it’s economically sound.

• Even if the end result is modest, the perception of forcing other nations to negotiate is a headline victory.

• He may spin a partial agreement as a total win, and markets will respond positively to relief, not just substance.

And don’t forget: voices like Elon Musk and Peter Thiel, who care about capital markets, still have the President’s ear. He won’t let Wall Street burn forever.

8. What Investors Should Actually Do

This is where it gets actionable.

A. Don’t Chase Headlines

• The bounce on April 7–8 was tempting — but it fizzled fast.

• Price action matters more than policy noise.

B. Look for Base Building

• Watch for sideways ranges forming with rising volume at support.

• These are signs of smart money accumulation.

C. Scale In Carefully

• Don’t go “all-in.” Use tiered entries.

• Take partial profits on strong moves — especially if driven by sentiment, not fundamentals.

D. Use Optionality

• In volatile environments, consider options strategies to define risk.

• Or use tight stops, if that fits your system.

You’re not trying to catch the exact bottom. You’re trying to catch the confirmation.

There is never 100% certainty — only evidence stacking.

9. Conclusion: It’s Bad — But Maybe Not That Bad

We may be in for a new world order in trade. But the market is already adjusting.

The worst-case scenario is being priced in. And in markets, perception is often worse than reality.

Yes, these tariffs may linger. The global system may take years to find a new equilibrium. And yes, many individuals and sectors will suffer.

But stocks — as forward-discounting machines — are not waiting for perfect peace. They are looking for the peak of panic, and when that moment passes, they move.

And that’s why I come back to my first principle:

Things are rarely as bad — or as good — as most people think.

So stay sharp. Stay cautious. But stay ready.

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This article was written by Itai Levitan at www.forexlive.com.