Zorrox Weekend Update 13.4.25

Tariffs, Volatility, and a Shifting Global Landscape: What Traders Need to Know

Last week, markets reacted sharply to new developments in U.S.–China trade relations. President Donald Trump reaffirmed a universal 10% tariff on all imports while announcing a 90-day suspension for most U.S. trading partners—with one key exception: China. In response, China imposed retaliatory tariffs on U.S. exports, reigniting fears of an escalation in the trade war.

Details of the Tariff Dispute

The initial shock came early in the week when the White House confirmed the 10% tariff would take effect. However, a 90-day grace period was granted to major U.S. allies, excluding China. This strategic exclusion signaled a tougher stance toward Beijing, triggering an immediate response: tariffs on American agricultural and tech products.

Market Reaction: From Risk to Safe Havens

U.S. stock markets didn’t take long to respond. The S&P 500 fell over 2.3% midweek before partially recovering on Friday. Tech and industrial stocks suffered the biggest losses, while investors shifted toward more defensive assets. Gold hit a three-month high, and 10-year Treasury yields fell—clearly reflecting a preference for low-risk holdings.

Key Indices:

• S&P 500: –2.3% midweek, slight rebound by Friday

• Dow Jones: –1.8% for the week

• Nasdaq: –2.9%, led by tech sector declines

Global Repercussions: LATAM and Asia on Alert

Tariff uncertainty quickly spread to global markets. Latin American currencies—especially the Mexican peso and Brazilian real—weakened against the U.S. dollar. Volatility in the USD/MXN pair spiked, as Mexico, a key U.S. trade partner, remained on edge about possible policy shifts. In Asia, the yuan fell to its lowest level in months. European and Asian stock indices also closed lower throughout the week.

Expert Reactions: Inflation and Growth in Focus

Economists and analysts warned that an escalation in tariffs—especially between the world’s two largest economies—could reignite inflationary pressures by raising import costs. Others pointed to rising risks of supply chain disruptions and potential global stagflation scenarios. Some investment banks have already started cutting global growth projections for Q3 by as much as 0.3 percentage points.

Investor Positioning: Caution and Sector Rotation

Amid volatility, large funds adopted defensive positions. The flow into safe havens boosted gold prices, while demand for U.S. Treasuries increased. In equities, consumer staples and utilities outperformed. In contrast, tech and export-heavy firms struggled due to their exposure to global uncertainty. In the FX market, trading volumes rose, with a focus on USD/MXN and USD/CNY pairs.

Outlook: What to Watch This Week

• USD/MXN: Continued volatility expected, with upward pressure on the dollar if trade tensions with Mexico persist.

• Chinese Tech Stocks (e.g., Alibaba, Tencent): May continue to decline as investor sentiment weakens.

• Gold (XAU/USD): Could maintain its upward trend if geopolitical uncertainty persists.

• U.S. Treasuries: Yields may keep falling as appetite for low-risk assets continues.

• S&P 500: May trade sideways or see further declines if earnings reports reflect higher tariff-related costs.

Advice for Traders: Agility and Information Are Key

In an environment where volatility is the new normal, traders must prioritize risk management, maintain a global macroeconomic perspective, and act with discipline. Stay alert to headlines from Washington and Beijing. In FX, closely monitor emerging market currencies. In equities, it may be time to consider defensive sectors and downside hedging.

To summarize: Stay alert. The market doesn’t just respond to what is happening, but to what might happen.