Policy Whiplash: Tariffs and Twists

Table of Contents

• Our Week in the Market

• Policy Whiplash: Tariffs and Twists

• Data Dive: Shipping Slump Signals Slowdown

• War & Pieces: Ceasefires and Sideshows

• What to Look Forward To Next Week

Our Week in the Market 🪙🪙

• Equities: Markets bounced back hard. The S&P 500 and Dow notched sharp weekly gains​, with tech stocks leading a 4% + surge as investors sniffed out hopeful hints in the trade war saga. The Nasdaq rallied for a fourth straight day, helped by a 7% jump in tech-sector shares (Alphabet’s earnings beat certainly didn’t hurt​). Europe rode the wave too, marking a second week of gains across the pond​. It was a risk-on party, even if indexes are still a few percent shy of pre-tariff highs​.

• Bonds: Government bonds caught a bid amid the chaos. US Treasury yields fell notably as tariff turmoil and global growth jitters sent investors scurrying for safety. The 10-year U.S. yield dipped to ~4.27%​, and German bund yields slipped after the ECB’s dovish stance. Bond bulls are betting that central banks will keep riding to the rescue if trade drama dents the economy.

• Commodities: Gold flirted with record highs near $3,500/oz early in the week, a shiny refuge from the tariff tempest​. But the safe-haven metal finally lost a bit of its luster late in the week – sliding to about $3,293 as rumors of trade truces calmed nerves (a 1.7% pullback from its peak)​. Oil prices stayed oddly range-bound in the $65–$90 zone, torn between opposing forces: on one hand, slower trade means less demand; on the other, geopolitical rumblings (from the Middle East to Eastern Europe) keep a figurative floor under crude.

• FX: The U.S. dollar snapped a four-week losing streak, inching up about 0.5% for its first weekly gain since mid-March​. It was a whipsaw week for the greenback: early on, an erratic mix of tariff angst and political meddling had the dollar reeling, but by Friday China’s tariff exemptions and de-escalation chatter gave the buck a boost​. Safe-haven currencies like the yen and Swiss franc sagged as risk appetite returned​. Meanwhile, the euro couldn’t catch a break, slipping to around $1.13 despite upbeat UK retail data across the Channel​. FX traders are dizzy, but for now the dollar’s relief rally suggests maybe – just maybe – the trade war fever is breaking.

Policy Whiplash: Tariffs and Twists

If you felt like you had whiplash from the policy news this week, you’re not alone. In the span of days, markets have been yanked from terror to euphoria by tweet-fueled U-turns in trade and monetary policy. The U.S.–China tariff slugfest took a surprising turn: President Trump went from declaring April 2 a protectionist “Liberation Day” (slapping the heftiest import levies in a century) to hinting at a cease-fire by mid-week​ By Tuesday, he was suggesting de-escalation, claiming direct talks with Beijing were underway, only for Chinese officials to flat-out deny it hours later​. Come Friday, Beijing did toss a bone—granting selective tariff exemptions on U.S. goods—and Trump crowed that Xi Jinping personally called him to negotiate​. Who to believe? Traders are understandably skeptical, but they latched onto the notion that things might be getting less bad. As one weary asset manager put it, there’s “relief that maybe some of the worst case of the Trump tariff actions won’t come true”​reuters.com.

It wasn’t just China in the crosshairs. In a feat of multi-tasking, Washington opened new fronts in the trade war against its allies. The White House floated 200% tariffs on European wines and spirits, prompting EU threats of retaliation​. (American bourbon lovers and French winemakers alike spat out their drinks at that one.) And in a move that managed to baffle economists and pirate enthusiasts alike, the U.S. is mulling steep port fees that could clobber Caribbean trade – a policy so counterintuitive it might actually drive Caribbean importers to buy more from China, the very outcome tariffs were supposed to prevent​ balticexchange.com. Policy absurdity, meet unintended consequences.

Meanwhile, the Federal Reserve got dragged onto this rollercoaster. Early in the week, Trump decided to channel his inner reality-TV host and reportedly threatened to fire Fed Chair Jerome Powell for not cutting rates fast enough – a shocking affront to Fed independence that briefly sent the dollar tumbling​. By the next day, he backpedaled furiously, insisting it was never on the table and that Powell’s job is safe… for now​. The market’s reaction? A collective eye-roll and a quick recovery in the greenback. This kind of head-spinning policy messaging – tariffs on, tariffs off; “You’re fired,” “Never mind” – has investors reaching for the Dramamine. The upshot is a volatile status quo: exceptional uncertainty has become the norm​. Businesses are stuck reading tea leaves (or rather, tweets), and market volatility remains elevated as everyone tries to game out the next twist or tantrum from policymakers. In short, it’s a world where trade policy can change on a dime and even central bankers sleep with one eye open.

Data Dive: Shipping Slump Signals Slowdown

Beneath the headline-grabbing stock rallies, a more ominous economic shift is underway in the real economy. Global shipping activity has slumped – hard. The Freightos Baltic Index (FBX), a benchmark for container shipping rates, has plunged over 50% since January​. In plain English, the cost to ship stuff overseas has collapsed, reflecting a sharp drop in demand to move goods. This isn’t your routine seasonal dip; it’s a red flag that the world’s supply chains are seizing up. Tariffs and trade uncertainty have companies pulling back orders, and an expanding fleet of cargo ships is now chasing far fewer shipments. The result? Shipping lines slashing prices and vessels going out only half-full. Analysts note this “cooling freight market” is likely to persist into next year​balticexchange.com​balticexchange.com, a worrying sign that global trade growth is grinding down.

The data backs it up: the IMF projects global trade growth will be more than cut in half this year – from 3.8% last year to a meager 1.7%​. That’s practically stall speed for world commerce. Much of this sudden slowdown stems from the tariff crossfire. U.S. import taxes have risen to their highest in a century, and retaliatory tariffs abroad are biting into trade volumes​. On top of that, the chaotic on-again, off-again tariff announcements have left businesses in limbo, prompting many to delay investments and cancel orders in case the rules change tomorrow ​imf.org. From big manufacturers to small export firms, the sentiment is “wait and see” – which in practice means less buying, less shipping, and less hiring in trade-related sectors.

There are a few quirky shifts under the surface. Some “winners” are emerging in this trade shake-up – if you can call it winning. Countries like Vietnam and Mexico have seen certain export orders tick up, as companies look for tariff workarounds and move supply chains to friendlier shores (one nation’s trade war is another’s opportunity). And remember those exorbitant U.S. tariffs on foreign cars? They’ve wreaked havoc on German and Japanese automakers, but they also gave U.S. car dealers a brief sales bonanza as consumers rushed to buy imported cars before prices spiked​. These distortions won’t last, though. Economists warn that once the front-loading fades, the underlying trend is weaker demand. Indeed, key freight routes are reporting excess capacity – not enough cargo to fill the ships – and forward indicators point to further softness. It’s an under-the-radar reality check: while equity traders cheer every hint of a trade truce, the real economy is feeling the chill from a trade war that’s already gone quite far. Keep an eye on those unglamorous metrics like shipping rates and export orders; they’re telling a more sober story about where growth is headed (and it’s not a great direction).

War & Pieces: Ceasefires and Sideshows

Geopolitics provided plenty of drama this week – though markets largely treated it as a sideshow. In Eastern Europe, Washington made a high-profile push to broker peace in the grinding Russia–Ukraine conflict. U.S. envoys shuttled between Moscow and Kyiv, and there was talk of a limited cease-fire deal covering energy infrastructure and Black Sea grain shipments​. For a brief moment, it looked like we might witness a grand diplomatic breakthrough. But reality intervened: fighting continues unabated on the front lines, and the “peace talks” feel more like a press release than a path to real peace. The Kremlin and Kyiv remain far apart, and the much-trumpeted negotiations have so far delivered more optics than outcomes. In other words, little has changed on the ground, aside from maybe a temporary lull in blowing up each other’s oil depots.

In the Middle East, a cease-fire of a different sort fell apart spectacularly. The fragile truce between Israel and Hamas – which had paused hostilities in Gaza for a few weeks – collapsed this week, shattering hopes for a longer respite​ usbank.com. Israeli forces resumed operations, and Hamas, still holding hostages from the 2023 war, returned to firing rockets. It’s a grim “back to business as usual” in a conflict that’s been simmering for months. Meanwhile, in Yemen’s proxy war, the Houthi rebels decided to stir the pot by threatening new attacks on shipping in the Red Sea – specifically targeting Israeli-linked vessels ​balticexchange.com. They pointedly said other nations’ ships are off the hit list (for now), essentially declaring an open season on one country’s cargo. It’s a geopolitical powder keg: tensions in a critical maritime chokepoint through which oil and goods flow to Europe. So far, the threats haven’t materialized into action, but it’s a situation ripe for miscalculation. Insurance premiums for vessels in the region are surely being recalculated as we speak.

Through all this global tumult, financial markets mostly shrugged. Why? Because at the moment, tariff tweets trump missiles and militants in the market’s risk calculus. As one strategist wryly noted, investors see trade policy uncertainty as a more immediate threat to portfolios than literal warfare ​usbank.com. Harsh but true: neither the unresolved war in Ukraine nor the flare-up in Gaza moved the needle much for stocks or oil prices this week. It’s not that these conflicts don’t matter – they absolutely do, especially on the humanitarian front – but traders have become almost numb to them, pricing in a long grind rather than sudden shocks. Barring a major escalation (say, a NATO incident or a broader Middle East war), the market’s main obsession remains the economy. Still, the geopolitical undercurrents bear watching. A surprise peace deal in Ukraine or a new conflict in the Gulf could quickly shift the narrative. In this absurdist era, though, peace seems as unpredictable as war. For now, the global stage is full of sound and fury, signifying… not much for Mr. Market.

What to Look Forward To Next Week

• Big Tech Earnings Bonanza: Another huge week for earnings is on deck. Four of the “Magnificent Seven” tech giants report results – brace for Apple (AAPL) and Amazon (AMZN) on Thursday, and Microsoft (MSFT) and Meta Platforms (META) earlier in the week. With these megacaps comprising a hefty chunk of the indexes, their numbers and outlooks will have outsized influence. Can Apple shrug off slower gadget sales? Will Amazon’s cloud business show a post-holiday rebound? Investors will be hanging on every word of guidance, looking for any hint that tariffs or macro woes are denting their prospects. After Alphabet’s upbeat report helped spark this week’s rally, the bar is high for the rest of Big Tech to deliver.

• Economic Data Deluge (U.S.): Wednesday, April 30 brings the first peek at Q1 U.S. GDP (Commerce Dept/BEA). This is the quarter when tariffs really bit, so economists expect growth to downshift – keep an eye on business investment and inventory numbers for signs of caution. The next day, Thursday, we’ll get the Fed’s favored inflation metric – March core PCE Price Index (Bureau of Economic Analysis). With the Fed under immense political pressure to cut rates, any softness in PCE could bolster the doves (and vice versa). And capping the week, Friday, May 2, is the big one: the April U.S. Jobs Report (BLS). Will the labor market finally show cracks? So far consumers and hiring have been resilient, but a significantly weak (or strong) payrolls number could swing bets on the Fed’s next move. Expect some pre-weekend volatility as Wall Street parses the wage growth and unemployment figures in that report.

• Global Macro Highlights: It’s not just the U.S. in focus. Eurozone flash CPI for April lands mid-week, alongside the Eurozone Q1 GDP reading (Eurostat). Europe has been teetering under the tariff onslaught and high energy costs, so any downside surprise in growth could feed talk of more ECB stimulus. Over in Asia, China’s official PMI for April drops on Wednesday – a key health check on the Middle Kingdom. Given China’s growth is now seen slowing to ~4% under tariff pressure​, a weak manufacturing PMI could spook commodities and emerging markets. Also, watch Japan’s central bank (BOJ), which wraps up a policy meeting on Thursday. No change in rates is expected (they’re still analyzing the tariff fallout​), but any commentary on the yen or inflation will be parsed closely.

• Trade Talks & Political Calendar: The trade soap opera continues. U.S.–Japan trade talks enter Round 2 next week as negotiators meet in Tokyo​. So far, Japan has avoided the worst of Trump’s tariff wrath (auto tariffs were paused and no “currency manipulation” clauses yet​), but these talks could produce headlines on market access or tech exports. Any U.S.–China developments will, of course, be market-moving wildcards – keep an ear out for rumors of high-level calls or a meeting being set. Politically, chatter around a potential U.S. debt ceiling battle is starting to percolate in D.C. (’tis the season), and while not yet front page, any signs of brinkmanship there could begin to rattle bond markets. Lastly, global investors will monitor signs of easing (or escalating) tensions from the geopolitical hot spots: e.g. whether the Ukraine grain shipping deal holds, or if Middle East skirmishes threaten oil transport. None of these are scheduled events per se, but in this environment, expect the unexpected.

Next week promises plenty of catalysts and, undoubtedly, a few surprises. As always, Open Terms will cut through the noise and cover the twists with our trademark irreverence. Buckle up – and we’ll see you on the other side of the headlines!

OPEN TERMS