Shock and negative awe at Liberation Day.  But terms so absurd, probabilities favor negotiations. 6 nations key Array ( [cookie] => b975fb-77ceec-4756ca-61eb4a-b31696 [current_usage] => 1 [max_usage] => 2 [current_usage_crypto] => 0 [max_usage_crypto] => 2 [lock] => [message] => [error] => [active_member] => 0 [subscriber] => 0 [role] => [visitor_id] => 151139 [user_id] => [reason] => Usage under limits [method] => ) 1 and can accesss 1

VIDEO: the terms of Liberation were a negative surprise.  But they are so absurd, that these look to be a negotiating tactic.  And ultimately only 6 countries matter.

Please click below to view our Macro Minute (duration: 11:23).

The unveiling of new U.S. tariff terms has jolted markets, but the extreme nature of the proposed measures points to a high likelihood that these will ultimately prove short-lived.

• The White House announced sweeping new tariffs that sparked a sharp market reaction, but deeper analysis reveals their foundation is shaky.
  – The baseline 10% tariff on all imports was initially perceived as a relief, given higher expectations.
  – However, an additional country-specific surcharge based on a dubious “reciprocal tariff” formula radically changes the narrative.
  – These reciprocal rates are based on a strange calculation derived from the U.S. trade deficit divided by import value.
  – For instance, this approach attributes a 67% rate to China, 39% to the EU, and 46% to Japan. These figures reflect an effort to impose leverage rather than economic realism.
• The proposed tariff methodology indicates the White House is posturing for negotiation rather than enforcement.
  – Key exemptions for semiconductors, critical minerals, energy, and pharmaceuticals suggest recognition of strategic supply chain priorities—particularly around AI infrastructure.
  – Moreover, the staggered implementation dates—April 5 for the baseline tariff and April 9 for the country-specific duties—give trading partners a narrow window to respond.
  – The executive order even leaves room to scale back penalties if “significant steps” are taken by counterparties.
• The potential for negotiation is further reinforced by public statements from President Trump, who framed the tariffs as a retaliatory measure meant to encourage reciprocal trade rather than escalate tensions.
  – Trump’s direct invitation to foreign leaders to “terminate your own tariffs” and pursue fairer trade signals an openness to deal-making.
  – That’s supported by early responses: India and Israel have pledged to drop tariffs by April 9, Canada has issued conciliatory remarks, and South Korea plans to negotiate.
  – These developments suggest that a majority of affected nations will pursue diplomacy over retaliation.
• Supporting this interpretation, analysis shows the burden of these tariffs is highly concentrated.
  – Just six countries account for 70% of the implied duties, highlighting how a few key deals could defuse much of the pressure.
  – Countries in Latin America, by contrast, are mostly seeing a flat 10% rate—raising the possibility that supply chains may be intentionally steered toward friendlier regions.
• Further backing the argument for a short lifespan of these tariffs is the result of a recent NYT-cited trade war simulation.
  – Trade experts role-played a global trade confrontation and found that negotiations led to de-escalation. In the simulation, most countries ultimately dropped tariffs against the U.S., implying that aggressive posturing followed by bilateral agreements is a viable—and even likely—outcome.
  – The key insight was that the U.S. maintains the upper hand as the world’s largest consumer market, and reciprocal tariffs are more persuasive than punitive when used as leverage in bilateral talks.
• From a market perspective, the initial reaction to these tariff announcements was sharply negative, with equity futures plunging after-hours.
  – However, investors appear to be reassessing. The VIX term structure surged post-close, but this steep curve often precedes mean reversion and a return to risk appetite.
  – Additionally, inflation expectations remain anchored—1-year forward inflation breakevens have declined even as tariff rhetoric intensified—undermining the argument that tariffs will be structurally inflationary.
• Stocks may also be mispricing the political strategy behind these tariffs.
  – President Trump has clear incentives to boost markets and attract investment into U.S. manufacturing ahead of a potential re-election.
  – Tariffs could be used as a cudgel to force concessions and generate domestic economic activity, including new factory builds.
  – These market-positive motives clash with fears of prolonged trade disruption.
• Upcoming key events this week include the March nonfarm payrolls report and remarks from Fed Chair Powell—both of which could re-anchor investor focus on domestic fundamentals.
  

Bottom Line: negative surprise today but stay on target as tariff announcement suggests deal-making over trade war

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Key incoming data April:

• 4/1 9:45 AM ET: Mar F S&P Global Manufacturing PMI Tame
• 4/1 10:00 AM ET: Mar ISM Manufacturing PMI Tame
• 4/1 10:00 AM ET: Feb JOLTS Job Openings Tame
• 4/2 10:00 AM ET: Feb F Durable Goods Orders MoM
• 4/3 8:30 AM ET: Feb Trade Balance
• 4/3 9:45 AM ET: Mar F S&P Global Services PMI
• 4/3 10:00 AM ET: Mar ISM Services PMI
• 4/4 8:30 AM ET: Mar Non-farm Payrolls
• 4/7 9:00 AM ET: Mar F Manheim Used Vehicle Index
• 4/8 6:00 AM ET: Mar Small Business Optimism Survey
• 4/9 2:00 PM ET: Mar FOMC Meeting Minutes
• 4/10 8:30 AM ET: Mar Core CPI MoM
• 4/11 8:30 AM ET: Mar Core PPI MoM
• 4/11 10:00 AM ET: Apr P U. Mich. 1yr Inf Exp
• 4/14 11:00 AM ET: Mar NYFed 1yr Inf Exp
• 4/15 8:30 AM ET: Apr Empire Manufacturing Survey
• 4/16 8:30 AM ET: Mar Retail Sales
• 4/16 10:00 AM ET: Apr NAHB Housing Market Index
• 4/16 4:00 PM ET: Feb Net TIC Flows
• 4/17 8:30 AM ET: Apr Philly Fed Business Outlook
• 4/17 9:00 AM ET: Apr M Manheim Used Vehicle Index
• 4/23 9:45 AM ET: Apr P S&P Global Services PMI
• 4/23 9:45 AM ET: Apr P S&P Global Manufacturing PMI
• 4/23 10:00 AM ET: Mar New Home Sales
• 4/23 2:00 PM ET: Apr Fed Releases Beige Book
• 4/24 8:30 AM ET: Mar P Durable Goods Orders MoM
• 4/24 8:30 AM ET: Mar Chicago Fed Nat Activity Index
• 4/24 10:00 AM ET: Mar Existing Home Sales
• 4/25 10:00 AM ET: Apr F U. Mich. 1yr Inf Exp
• 4/28 10:30 AM ET: Apr Dallas Fed Manuf. Activity Survey
• 4/29 9:00 AM ET: Feb S&P CS home price 20-City MoM
• 4/29 10:00 AM ET: Apr Conference Board Consumer Confidence
• 4/29 10:00 AM ET: Mar JOLTS Job Openings
• 4/30 8:30 AM ET: 1Q A GDP QoQ
• 4/30 8:30 AM ET: 1Q ECI QoQ
• 4/30 10:00 AM ET: Mar Core PCE MoM

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