Panic To Rally: The Volatile Tariff Standoff

Hei Tung Sam, Assistant Manager, Dealing | Contract for Differences

Sam graduated from National University of Singapore with a Master of Science in Finance. He personally manages his own investment portfolio and does equity and economic research in his free time. Sam believes that education and information is essential to making good financial decisions.

Since the start of 2025, President Donald Trump has been announcing and hinting at implementing tariffs on countries such as Canada, China, the European Union, Mexico and more. With every new tariff announcement, the world heads towards a potential trade war. So far, the Trump administration has changed tariff rates, paused implementations and even refused negotiation, sending global markets into a time of high volatility with the VIX hitting 52.33, a level only seen during financial crisis such as in 2020 and 2008 [1].

The Trade War Rollercoaster

Source: Reuters

On 2 April 2025 (“Liberation Day”), President Donald Trump presented a table identifying countries he labelled as “Worst offenders”, detailing the supposed tariffs imposed on the US and the reciprocal tariffs the US will now impose. The most notable countries were China with an additional 34% tariffs imposed, the European Union with 20% tariffs and Vietnam with 46%. This sent shockwaves across the financial markets, causing the S&P500 to close the week 8.21% lower, the Nikkei 225 down 7.41% and the Straits Times Index dropping 3.91% lower. On 4 April 2025, China imposed a 34% tariff on imports of US goods in response to the US’ 34% tariff on China goods [2]. This escalation of reciprocal and retaliatory tariffs between the two biggest economies threatens to plunge the world into a potential recession. JPMorgan analysts have raised their recession forecast from 40% to 60% [3]. The S&P500 dipped 19.50% from its recent high of 6,147 to 4,948 within 33 trading sessions between 19 Feb 2025 to 7 April 2025. Daily movements of 3-10% in either direction have become common in this volatile macro environment.

On 9 Apr 2024, President Trump announced a 90-day delay on most tariffs (imposing 10% base tariffs instead), while raising tariffs on China imports to 125% [4]. Global markets rallied on the news with the S&P500 rising 9.52%, its biggest single-day gain since 2008 [5]. The Straits Times Index surged more than 8%, the Nikkei 225 index gained over 7% and the Hang Seng Index increased by around 3%.

Looking forward

The world economy and global trade remain on a knife’s edge, with every tweet and news from major world leaders influencing market direction for better or worse. Analysts and market participants are actively debating the impact of how having a base rate of 10% tariffs on US imports will affect global trade, and the potential scenarios that may unfold after the 90-day pause.

Market Bulls are looking for more positive developments in trade negotiations, as most countries send trade representatives to Washington in the hopes of establishing a more stable, low-tariff environment between the US and its trading partners.

Market Bears, on the other hand, fear a potential breakdown in trade negotiations, and even further escalation in the trade war between US, particularly with key partners like the European Union and China. This scenario could increase the likelihood of a recession, economic slowdown and further downturn in the global financial markets.

Opportunities you can seize

Given the heightened uncertainty and volatility, this environment presents opportunities for active traders. With CFDs, you can access over 5000+ counters, ranging from FX to Equities, Index and Commodities. Furthermore, with the ability to go both long and short, you can take advantage of both a plunge and rebound in global indexes, and to manage your portfolio’s risk on the fly. This gives you both the flexibility and ability to take advantage of all market conditions.

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