Stronger and Broader US Tariffs Than Expected

In focus today

In the US, the ISM March Services Index is due for release in the afternoon. Its PMI-counterpart released earlier pointed towards a more positive outlook despite the tariff uncertainty. We will also keep an eye out for the March Challenger Report on layoff announcements. While usually not a market mover it could provide further clarity on the scale of DOGE’s federal layoffs.

In the euro area, we receive the final March PMIs. In the past months, the final PMIs have shown unusual revisions of the flash release, which makes them more important to follow. Also in the euro area, we will scrutinize the minutes from the March ECB meeting for any hints of what to expect at the April meeting.

In Sweden, services and composite PMIs are due for release today. The consensus view is for a roughly unchanged figure compared to last month’s numbers, like Monday’s manufacturing PMI. Furthermore, Riksbank Governor Thedéen participates in a panel discussion regarding EU capital markets. As such, Swedish monetary policy is unlikely to be discussed at length, but there might still be the odd titbit worth keeping an eye out for.

Economic and market news

What happened overnight

In the US, Donald Trump presented a range of new, country-specific tariffs on “Liberation Day”. In a move that has resulted in confusion as to the exact country-specific rates, Trump announced tariff rates ranging from 10-60%, depending on the country, with a 10% universal tariff alongside the country-specific duties. The new tariffs were generally stronger and broader than we and markets expected, and sent shockwaves through global markets amid worries that the aggressive duties will slow growth, hit corporate earnings, and increase inflation.

In China, the Caixin PMI services, which is the private survey, surprised to the upside as it rose to 51.9 in March from 51.4 in February. This was mainly driven by increases in domestic demand, as both business activity and new orders picked up and contributed to the strongest growth in the services sector since December.
What happened yesterday

In Denmark, Nationalbanken’s (NB) currency interventions in March were released. In line with expectations, NB did not intervene in the foreign exchange market, thereby marking the 26th consecutive month without intervention.

In Poland, the Polish central bank (NBP) kept the leading interest rate unchanged at 5.75%, in line with consensus. We will have to await Governor Glapinski’s press conference, scheduled at 15.00 CET today, for more information regarding the NBP’s view on rates going forward.

Equities: Asian stock markets are lower this morning, with Japanese markets hit hardest as the currency strengthens as Japan is set to face a 24% tariff. European futures are down as well, while US markets are experiencing the most significant decline due to this massive implicit tax hike for US consumers. The cross assets playbook this morning aligns closely with what we have observed in the trade war escalation over the last one and a half months.

FI&FX: The rumours of soft tariffs ahead of the press conference that gave a lift to equities and US yields going into the press conference proved to be wrong. The outcome was worse than expected and it raises the risk for a US recession. Equity futures plunged with S&P 500 and Nasdaq indicating a deep-red opening. Nikkei is down 3.5%. US treasuries rallied across the curve while the 2s and the 10s are off some 15bp from yesterday’s highs. The USD is generally weaker. USD/JPY loses 2% overnight and trades close to 147. EUR/USD adds to initial gains and breaches 1.09. Scandi FX is caught by opposing forces following the Trump announcements: a higher probability of a US recession (negative) vs higher appeal of non-US assets (positive). EUR/SEK at 11.75 and EUR/NOK 11.33.