President Trump’s so-called “Liberation Day” has arrived and an announcement is scheduled for the Rosa Garden at 4pm Washington time when all will be revealed in terms of the tariff actions against the US’s trading partners.
President Trump stated on Sunday that the plan will cover “essentially all” countries but then on Monday stated that the plan would be “very nice, relatively speaking” and again emphasised the word “reciprocal” as “very important, what they do to us we do to them”. But that is a very difficult measure to benchmark in reality with the US free to basically do what it wants. The Office of the US Trade Representative (USTR) on Monday released its annual National Trade Estimate Report, which highlights country-by-country trade barriers amongst 40 US trading partners. As an indication of how broad trade barriers can be, the report highlights 14 different metrics that determine the extent of trade barriers for US exports into foreign markets, ranging from subsidies to tech-sector barriers to government procurement policies to labour and environment laws.
These metrics will likely be cited today by President Trump as factors that were taken into account when setting country tariffs. According to White House Press Secretary Karoline Leavitt, sector-specific tariffs will not be the focus of today’s announcements with broad country-level tariffs the main tariff plan. If that’s the case, the countries given greatest focus in the USTR’s National Trade Estimate Report could very well be the countries that are hit most aggressively with tariffs – likely to be around the 20% to 25% level.
If that is the basis of action then China received greatest focus in this report (48 of the 397-page report) with the EU next (34 pages), India (16), Russia (15), Indonesia (14), Japan & Turkiye (11), the Philippines (9), Vietnam (8), South Korea and Mexico (7), and Canada and a number of other countries (6). A lot of these countries would also be included in another group referred to by Treasury Secretary Scott Bessent as the “dirty 15” – the 15% of nations that account for the bulk of US trading volumes.
We see some key aspects that will determine whether the financial markets interpret the announcements as aggressive or not. A wide blanket tariff globally capturing all the major trading partners with a 20%-25% tariff would be seen as most aggressive and likely illicit the biggest risk-off reaction. But there has been speculation that discussions on trade deals could exclude certain countries (the UK?) and the more examples of that the better the markets can take the announcements. Also, does China escape the scale of action compared to others given two 10% tariffs have already been announced? Trump may go with a smaller 10% tariff on most countries which would also be taken better by the markets and would help reduce risk aversion. Finally, does Canada and Mexico escape the same scale of action given they are in the USMCA? Again, that would be good news for investors.
All told, we believe the financial markets are under-estimating the scale of action. Global rates are falling but CAD, AUD, NOK and SEK outperformed yesterday, hardly signs of tariff concerns and rising risks of global trade disruptions. We may well be set for some reversal of these currencies outperforming if the US delivers a more aggressive plan of tariff action than the markets seem to be fearing.
