Inside Markets — Response to Tariffs

The trade focus has shifted to the response to Wednesday’s tariffs with China choosing to retaliate, while Vietnam is open to negotiations. A period of retaliation, escalation and negotiation is expected to last several more weeks. Wednesday’s tariff announcements mostly aligned with our worst-case scenario except for the exemption on USMCA compliant goods and an absence of sector specific tariffs targeting semiconductors, shipping and pharmaceuticals. The most positive offramp from here would be a series of trade deals. In our view, a trade agreement with a G7 country would unwind most of the ~8% decline in the SPX since Wednesday.