The newly announced tariffs have significantly exceeded market expectations. Based on prior assessments, markets generally estimated tariff levels by correlating trade imbalances with tariff intensity. However, the current measures reveal no consistent standard and are filled with aggressive and threatening signals.
As the initiator of these tariff hikes, the United States is demonstrating a clear return to Monroe Doctrine-style unilateralism. It is evident that tariff rates across North America, South America, and the United Kingdom remain relatively low, while those targeting European countries hover around 20%, positioning them at a mid-range level globally. The most stringent tariffs, however, are once again centered on China.
From a geopolitical lens, the inclusion of countries like Japan, South Korea, Vietnam, Myanmar, and India—despite their varying trade relations—highlights a clear effort to encircle and constrain China. This reflects a strategic vision wherein the U.S. seeks to maintain the Americas as its sphere of influence, while attempting to suppress the development of Asia, particularly East Asia, through the erection of high tariff barriers.
From an industrial perspective, while a portion of manufacturing might be repatriated to the U.S., the majority of industries are unlikely to return. Even for those that do, the transition from investment to actual product output will entail a significant lag. These two categories of industries should be analyzed separately:
For those with the potential to return to the U.S., tariff exemptions may be offered as incentives—on the condition that companies invest and operate domestically.
For those industries unlikely to return, the U.S. is aiming to redirect their supply chains toward the Americas, especially Canada and Mexico. This strategy, however, is likely to fuel domestic inflation within the U.S.
From a dynamic standpoint, the tariffs announced are almost certainly not the final implemented rates. China has already taken the lead in launching reciprocal countermeasures, followed by vocal opposition from the EU and the UK, with additional tariff responses targeting U.S. goods. As a result, April is likely to witness a phase of global tariff chaos, where negotiation uncertainty poses a considerable threat to global trade. This turbulence could cause a sharp contraction in global trade volumes, and U.S. month-on-month inflation is expected to rise rapidly.
If the U.S. continues to escalate tariff pressure on China, the risk of a tariff spiral will increase. This is not the end of the story—it is, in fact, a signal that greater uncertainty is just beginning.
There is no doubt that the newly imposed tariffs will have a significant impact on U.S. inflation. In the short term, the month-on-month inflation rate is expected to accelerate, but the key question lies in whether long-term inflation expectations will also rise. Some investment banks have already concluded that rate cut expectations for 2025 are no longer viable.
From the perspective of the Trump administration, the plan is to offset the inflationary pressure of tariffs by controlling energy prices. However, the pricing power in global oil markets clearly lies in the hands of OPEC+ and other major producers. If prices fall too low, supply-side players are likely to respond with production cuts. This brings the issue into the realm of U.S. Middle East strategy, which complicates the picture even further. Given the unexpected magnitude of the current tariff actions, the direct data impact still requires further observation.
From a trading logic standpoint, our previous view was that the uncertainty introduced by tariffs would trigger a gradual downward revaluation in U.S. capital markets following a potential Trump re-election. Meanwhile, Europe—having priced in the upside from the German election cycle—would likely enter a period of weakness. In Asia, the Hang Seng and Nikkei remain attractive assets, and gold continues to be the most effective hedge against uncertainty.
As the new phase of the trade war unfolds, surging uncertainty is expected to drag down all asset classes, prompting investors to shift toward high-liquidity, cash-like holdings. From a tactical trading perspective, small-position swing trades in U.S. equities are feasible, and gold remains a highly recommended asset.
China’s import and export sectors will undoubtedly take a hit, but policy tools remain ample. The Chinese capital market is more sensitive to RMB liquidity than external shocks. If a wave of government bond issuance begins in April, boosting liquidity, China’s markets could trend upward amid volatility. We view the 3,200–3,250 range on the main index as an attractive buying zone.
While the United States maintains a proactive position in this round of global trade tensions, it is also facing growing internal and external pressures. Three major issues have now become tightly interlinked:
- Tariff levels vs. global retaliation
- U.S. dollar hegemony vs. dollar index performance
- Global energy pricing vs. settlement currencies
In the first wave of tariff hikes, the dollar index rose, creating a scenario in which the U.S. could simultaneously pursue all three objectives. However, this latest round has triggered a collapse in the dollar index. If global trade tensions escalate further and drive tariffs even higher, a weakening dollar could lead to a selloff in U.S. Treasuries and an accelerated global de-dollarization trend. This would touch the core of U.S. strategic interests, creating substantial pressure on the Trump administration.
To maintain dollar dominance while raising tariffs, the U.S. must fuel geopolitical conflict to create an environment of heightened global tension, thereby forcing capital to flow back into U.S. assets. At present, Iran appears to be the primary geopolitical target, but any destabilization in the Middle East would also impact global energy prices. Should Iran spiral out of control, so might global oil markets.
While the U.S. currently holds the upper hand in this strategic triangle, China, the EU, and other players still have cards to play. If China accelerates trade talks with Japan, South Korea, and the EU, and pushes forward local currency settlement systems, it could fatally disrupt the U.S.’s balancing act between trade, the dollar, and energy.
Ultimately, it is nearly impossible to preserve dollar hegemony while eliminating the trade deficit—these two goals are inherently contradictory.