U.S.-Indonesia trade deal; ASML reports; earnings ahead - what’s moving markets
Investing.com - Markets are currently pricing in the exposure of specific countries to sweeping U.S. tariffs "reasonably accurately," with several set to potentially lose more should the White House’s aggressive trade agenda escalate, according to analysts at Capital Economics.
President Donald Trump’s often-erratic levies have been a major driver of stocks in recent months, particularly after his announcement of punishing -- but now delayed -- "reciprocal" duties on a host of countries in early April.
Despite the relative uncertainty around Trump’s policy changes, equities have edged broadly higher, with investors optimistic that the president’s decisions to pause or scale back some of the tariffs could mean that his stance on trade is not as severe as originally feared.
On net, since Trump’s April 2 "liberation day" announcement, the biggest equity market winners have been Taiwan, Mexico and Korea, while stocks in China, Saudi Arabia, and Brazil are among the key laggards, the Capital Economics analysts led by Giulia Bellicoso said.
"Our sense is that these moves generally reflect the relative tariff exposure reasonably well," the analysts added, highlighting factors such as the magnitude of levies a country faces and the degree to which a nation’s exports depend on U.S. demand.
Commodity exporters stand to be especially hard hit should the trade tensions cause a slowdown in global growth and put a lid on the prices of energy and industrial metals, the analysts argued.
Against this backdrop, they predicted that equity markets in China, Mexico, the United Kingdom (TADAWUL:4280), and those of commodity-heavy nations like South Africa, Australia and Canada, could be the most impacted by the tariffs.
"As such, these indices are more vulnerable to disappointing developments on the U.S. trade policy front," the analysts said.
This week, Trump said the U.S. plans to send out letters to dozens of nations soon that will set out the terms of possible trade deals. He added that these countries will then have to choose whether to "take it, or [...] leave it."