Trump’s “liberation day” tariffs spark retaliation from China, trigger market sell off

Trump follows through with protectionist measures: US President Donald Trump announced on Wednesday a universal 10% tariff on all US imports, and higher reciprocal tariffs on specific countries, as he vowed to liberate the US from the “looting, pillaging, and raping” of the US by other countries.

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Who is targeted? The US slapped China with a 34% tariff, taking the total tariff on Chinese imports to 54%. It also targeted the EU with 20%, Vietnam with 46%, and Taiwan with 32%. The higher reciprocal tariffs will begin on 9 April, while customs agents have already begun collecting the baseline 10% tariff since yesterday.

A slight reprieve: Mexico and Canada will not be subject to tariffs beyond the 25% announced earlier. Products like steel, aluminum, and auto parts will also be exempt from the reciprocal tariffs and only subject to the previously announced levies.

China strikes back, others might soon follow: The move is set to ignite a global trade war after decades of liberal trade measures from the US, with trading partners widely expected to retaliate. Beijing led the pack with a 34% tariff on all goods imported from the US, with the EU expected to follow soon. Other countries are attempting to negotiate their way out of the measures, including Vietnam, whose president To Lam had a “ productive call ” with Trump, and will meet to negotiate a trade deal soon.

Off to bumpy start? Trump’s announcements on Wednesday triggered the worst week for US equities since the onset of the Covid pandemic, leading to the S&P 500 losing 9.1% through the week — including a 6.0% fall on Friday alone — erasing USD 5.4 tn in market value and the Nasdaq down 22.7% from its December peak.

Tech stocks in particular had a rough week, with chip maker Nvidia dipping 10.3% throughout the week and Apple seeing its share price fall 13.3% throughout the same period. Companies with significant exposure to China also saw a sell off, while recession fears drove investors to sell shares in banks and energy companies.

Exchanges outside the US fared little better, with the UK’s FTSE 100 losing 7.0% in the week and the EURO STOXX 50 down 8.2%. Further afield, Japan’s Nikkei 225 clocked a 7.3% decline during the week, Hong Kong’s Hang Seng recorded a 3.5% fall, while Korea’s Kospi and China’s Shanghai index survived the week in a better shape — albeit still in the red.

Investors across the globe are looking to government bonds as a way to guard against market volatility. Ten-year US Treasury notes saw yields fall 12.2 basis points to a six month low, while government debt instruments in Germany and elsewhere also saw their yields drop significantly. “A lot of investors I've talked to have just said in this kind of environment, let's go to cash and just wait it out,” Cherry Lane Investments Partner Rick Meckler told Reuters.

Some are already warning of an incoming recession, including Barclays Global Research Chair Ajay Rajadhyaksha, who told the Financial Times that “if the reciprocal tariffs are not walked back by April 9, which I don’t think they will be, you will probably be looking at a recession in the United States and the European Union.” Fed head Jay Powell is also warning that the tariffs will lead to “higher inflation and slower growth,” limiting the reserve’s monetary policy wriggle room with a growing concern that the country could enter into a period of stagflation.

The uncertainty also loomed over IPOs and M&A transactions: Swedish fintech Klarna, US-Based Chime and Stubhub all delayed IPOs or roadshows, Reuters reports. Market uncertainty, higher debt costs, and valuation risks are making it harder to close deals, an unnamed senior banker told the news agency.

THE CLOSING BELL: TADAWUL-

The TASI fell 1.3% yesterday on turnover of SAR 5.5 bn. The index is down 1.3% YTD.

In the green: Fitaihi Group (+9.7%), Zamil Indust (+6.6%) and Zain KSA (+5.0%).

In the red: Tadco (-8.6%), Entaj (-7.6%) and Raydan (-7.4%).

THE CLOSING BELL: NOMU-

The NomuC fell 2.7% yesterday on turnover of SAR 35.4 mn. The index is down 2.7% YTD.

In the green: Horizon Educational (+13.1%), United Mining (+10.0%) and NBM (+9.0%).

In the red: Alqemam (-14.9%), Albattal Factory (-12.9%) and Leen Alkhair (-12.6%).

CORPORATE ACTIONS-

Gulf Ins. Group’s BoD recommended a SAR 63 mn dividend distribution for FY 2024 at SAR 1.2 per share, according to a filing to Tadawul. The move is still pending shareholders’ and regulatory approval, after which a distribution date will be set.

Banque Saudi Fransi’s BoD recommended a share buyback of up to 15 mn treasury shares, according to a disclosure to Tadawul. The bank will use its own resources to fund the move, and the shares will be allocated to the share-based employee remuneration plan. The move is pending shareholders’ and regulatory approvals.

HorizonFood’s BoD approved the company’s transition to the main market from the parallel market, it said in a disclosure to Tadawul. Financial Al Istithmar Capital was appointed as advisor for the transition, pending approval from the Capital Market Authority.

Wasata Capital was appointed as financial advisor to oversee the capital reduction of Tihama Advertising, according to a filing to Tadawul.

Tabuk Agricultural Development’s (Tadco) BoD recommended a 52.9% capital reduction through the cancellation of 20.7 mn shares, it said in a disclosure to Tadawul. The operation will shrink the company’s capital to SAR 184.4 mn to offset accumulated losses. The proposal is still pending regulatory and shareholders' approval, with a financial advisor yet to be appointed.