This week, the Trump administration launched an unexpectedly reciprocal tariff policy, triggering significant fluctuations in global markets. The U.S. stock market experienced its worst sell-off since 2020, with the S&P 500 falling by 10% over two days, while commodities plummeted simultaneously, with oil and copper prices dropping more than 10% in a week, and a noticeable divergence in safe-haven assets.

4 Alpha Core Views:

1. Market Performance Review

U.S. stocks plummet: S&P falls 10% in two days, VIX breaks 40, U.S. stocks enter a technical bear market, and the market is in extreme panic.

Divergence of safe-haven assets: U.S. Treasury yields plummeted, gold surged before retreating, and the U.S. dollar index weakened.

Commodity market crash: Crude oil, copper, and other bulk commodities have significantly declined, reflecting a pessimistic outlook on global demand.

Bitcoin exhibits a "dual attribute": initially rising with the US dollar credit crisis, then falling back due to global risk asset panic, displaying the complexity of "safe haven + liquidity sensitivity."

II. Analysis of Trump's Tariffs

Exceeding expectations severely: Traditional allies set a "minimum threshold" of around 10%, while Asian countries impose tariffs as high as 25–54%, and the European Union also faces a 20% increase.

Political logic is stronger than economic logic: constructing legitimacy, increasing fiscal revenue, paving the way for tax reduction policies; enhancing bargaining chips in foreign negotiations, and increasing pressure for manufacturing to return.

The tariff strategy is crude but leaves room for negotiation, as countries like South Korea and Japan actively negotiate tax reductions.

The countermeasures from China and Europe are the biggest risk variables, especially since China has implemented countermeasures, which may lead to a long-term game.

3. Analysis of Non-Farm Employment Data

Surface stability, weak structure: the official unemployment rate is 2%, but U6 is as high as 7.9%, and has risen for two consecutive months.

Job growth has been revised down, and part-time positions have decreased. Average hourly wage growth has slowed, and labor participation rates remain low.

The statistical criteria for data have human distortions, leading to a decline in employment quality.

4. Liquidity and Interest Rate Analysis

The SOFR forward interest rates have declined significantly, indicating market expectations for the Federal Reserve to cut interest rates earlier.

The 2Y and 10Y U.S. Treasury yields have plunged in unison, indicating that the market has fully shifted to a "pricing recession" mode.

Powell's remarks are cautious, acknowledging the risk of stagflation but still not signaling easing, with policy in a wait-and-see phase.

5. Outlook and Suggestions for Next Week

Risk Factors:

The uncertainty regarding tariff retaliation escalation is high, especially whether China and the European Union will retaliate further.

Economic data "lagging response + data gap" intensifies the game between policy and market.

The market lacks a "priceable policy path", with extremely high structural vulnerability.

The market pricing logic has changed:

Shift from "inflationary pressures" to "high inflation + high tariffs → suppressed demand → early recession";

The yield on U.S. Treasuries and the volatility of risk assets corroborate the "pessimistic expectations + seeking policy bottom."

Suggestion:

Maintain a neutral stance and respond cautiously to market volatility.

Bitcoin has the potential to serve as a long-term "dollar liquidity proxy" and will benefit again if the Federal Reserve initiates easing.

Short-term control of leverage, waiting for policy easing and confirmation of market bottom signals.

What is the impact of the implementation of equivalent tariffs?

1. Macroeconomic Review of This Week

2. Market Overview

This week, Trump's reciprocal tariffs were implemented, but far exceeded market expectations, leading to a plunge in global risk assets.

U.S. Stocks: The S&P 500 index has fallen 10% over the past two days, marking the largest drop since March 2020; the Dow Jones Industrial Average fell 7.6% for the week, and the Nasdaq has entered a bear market (down 22% from its December peak). The semiconductor ETF (SOXX) plummeted 16% in a week, the worst performance since 2001. The VIX index briefly soared above 40, reflecting extreme short-term panic in the market.

Safe-haven assets: The 10-year Treasury yield plummeted by 32 basis points to 3.93%, hitting a new low since September 2022; spot gold surged to $3,023 per ounce before retreating, down 1.7% for the week; the dollar index fell 1.1% for the week.

Commodities: Brent crude oil plummeted 10.4% to $61.8 per barrel, as OPEC+ increases production amid concerns over demand. Copper prices dropped 13.9%, marking the largest weekly decline since July 2022; iron ore fell 3.1%.

Cryptocurrency: Bitcoin experienced a brief divergence from the U.S. stock market this week. After the imposition of reciprocal tariffs, the U.S. stock market plummeted while Bitcoin surged. However, following China's implementation of countermeasures, it dropped again, although the overall decline was better than that of the U.S. This highlights the dual contradiction of Bitcoin's safe-haven and risk attributes.

Bitcoin has vividly demonstrated the intertwining of its hedging and risk attributes under the impact of tariffs. When mutual tariffs were implemented, Trump's additional tariffs triggered global concerns about the credibility of fiat currency systems, activating Bitcoin’s role as an alternative currency, often referred to as "digital gold." However, following China’s 34% counter-tariff, panic over global supply chain disruptions ensued, with the VIX index surpassing 45, leading to indiscriminate selling of all risk assets. Bitcoin’s performance in this crisis reveals its essence as a complex entity of contradictions in the digital age: constrained by the liquidity shackles of traditional risk assets while embodying a revolutionary vision aimed at subverting the fiat currency system.

2. Economic Data Analysis

This week's data analysis focuses mainly on Trump's tariffs and non-farm data.

2.1 Analysis of Trump's Tariffs

Although the market had anticipated Trump's reciprocal tariffs, the scale and scope of the tariff increases announced by Trump on April 2 far exceeded market expectations.

In terms of content, Trump's reciprocal tariffs are mainly divided into two parts:

The United States has established a minimum benchmark tariff of about 10% for its traditional trade partners, such as the Five Eyes Alliance (UK, Australia, New Zealand), among others. It is noteworthy that the tariff rates for these countries towards the US are also roughly around 10%. This portion of the tariffs generally aligns with market expectations.

Imposing higher tariffs on trade partners in specific countries and regions, mainly in Asia. China has a new rate of 34% (in addition to the already imposed 20%, totaling 54%), Indonesia 32%, Vietnam 46%, Thailand 36%, South Korea 25%, and Japan 24%. Additionally, the European Union has increased by 20%.

Chart: US Tariff Situation Source: The White House

In fact, "reciprocal tariffs" is not an exact economic concept. In Trump's political narrative, it is a key means to balance trade deficits and also an important tool for negotiation. Further analyzing its political objectives, logically, Trump's tariffs have two main effects:

Building Legitimacy and Gaining Congressional Support: On one hand, Trump cloaks high tariffs in a "fair" guise to win public support from Midwestern manufacturing states; on the other hand, the revenue from tariffs will indeed increase U.S. fiscal revenue, which will be very beneficial for the subsequent implementation of tax cuts and deregulation measures, especially in gaining support from Congress.

Layout of negotiation chips for external negotiations, accelerating the return of the manufacturing industry: creating uncertainty in advance to lower the optimistic expectations of China and European export countries regarding the export outlook for 2025; applying maximum pressure to force global manufacturing leaders to accelerate localization manufacturing in North America.

At a deeper level, its essence is that Trump reconstructs the distribution order of interests both domestically and internationally by creating "controllable crises," converting short-term economic costs into long-term political capital.

From Trump's specific actions on tariffs, another characteristic of this tariff is that it is both simple and brutal while also leaving room for negotiation. The tariff rates imposed on specific countries/regions are primarily calculated based on trade deficits; additionally, in terms of implementation time, it has given other countries a certain amount of time, such as South Korea, Japan, and Vietnam, which have actively accelerated their negotiations with the United States and taken the initiative to lower tax rates to seek equivalent rate reductions.

The only thing that requires special attention is the countermeasures from China and the European Union. Due to China's reciprocal measures taken last Friday and its firm stance, it is expected that the game between China and the United States will significantly lengthen.

After the tariffs were introduced, risk assets plummeted, and the risk market began to price in future recession risks. The total number of interest rate cuts this year has now reached 4.

Chart: Interest Rate Market's Expectations for Year-round Rate Cuts Source: U.S. White House

2.2 Non-Farm Data

As we previously assessed, although the non-farm employment data appears to show a relatively robust state in terms of aggregate figures, further analysis reveals otherwise. Most current macroeconomic studies are generally trapped in an illusion: they believe that the labor market remains strong, and therefore a decline in inflation will naturally continue. However, we notice that the quality of employment is diverging from the superficial strength of the data.

Chart: U.S. March Non-Farm Employment Data Source: MishTalk

The key structural data is as follows:

1. The official unemployment rate is 4.2%; the U6 rate is even higher at 7.9%.

2. The total number of non-farm employment changes for January was revised down by 14,000; the change for February was revised down by 34,000; with these adjustments, the total employment numbers for January and February are 48,000 less than previously reported.

3. The unemployment rate has risen for the second consecutive month. With the increase in the number of layoffs by the government, the unemployment rate is expected to rise further.

4)所有非农工的平均时薪涨幅为8。 生产和非管理工人的平均时薪 涨幅为 3.9%,整体增速持续放缓。

5. The labor participation rate remains low at 5%; part-time employment decreased by 44,000, while full-time employment rebounded by 459,000 (partially correcting last month's drop of 1.22 million).

It is important to note that according to the U.S. Department of Labor, in terms of employment statistics, as long as you work for one hour, you are considered employed. If you are not working and are not looking for work, you are not considered unemployed but have exited the labor market; looking for job vacancies in job advertisements does not count as "looking for work"; you need to participate in actual interviews or send resumes to be included in the employed population. In fact, these distortions artificially lower the unemployment rate, artificially increase full-time employment, and artificially inflate the monthly wage employment report.

Although the data cannot deny the fundamental robustness of the U.S. labor market, the structural outlook is not optimistic. The anticipated "comprehensive cooling" has not yet arrived, but signs of deterioration are beginning to accumulate.

3. Liquidity and Interest Rates

In terms of the Federal Reserve's balance sheet, this week the Federal Reserve's broad liquidity remains around 6.1 trillion. From the perspective of interest rates and the Treasury market, we find that the market's expectations have undergone significant adjustments since March.

Chart: Changes in the U.S. Overnight Financing Rate and Treasury Yield Source: Wind

As shown in the above figure:

1. SOFR 12-month term rate (light orange line): This reflects the market's expectations for the Federal Reserve's interest rate level over the next year. The data shows a significant decline, diverging more from the current SOFR rate, dropping from about 4.3% to below 4.0%, indicating that the market is repricing: the Fed is more likely to cut rates earlier or maintain an accommodative stance for a longer period.

2. 2-year US yield (silk); The 10-year US yield has fallen rapidly and has fallen below 4.0%, and the 10-year yield is close to 3.8%. 这说明:市场对短期策略路径转向宽松已有共识(2Y反映); 对长期经济增长与通胀的预期也大幅下调(10Y反映)。 市场整体进入"定价衰退"阶段,认为interest 已不是核心风险,而是经济本身要出问题了

Overall, Trump's speech on "reciprocal tariffs" has intensified the market's pricing of stagflation risks, and the main logic of the market has shifted to: high inflation + increased tariffs → suppressed demand → early recession → the Fed may be forced to cut interest rates earlier.

In addition, this week's speech by Powell has attracted significant market attention. However, from his remarks, it is clear that the Federal Reserve is mired in a policy dilemma under stagflation. Powell's statements were generally cautious, acknowledging the "stagflation dilemma with rising unemployment and inflation risks" and emphasizing the need to wait for clearer data before adjusting the policy stance. Despite the market pricing in a 115 basis point rate cut by the Federal Reserve in 2024, with the probability of a rate cut in May rising to 35.1%; Powell suggested that "wait-and-see" remains the main tone.

2. Macroeconomic Outlook for Next Week

For global assets, the current situation is a typical period of rising structural uncertainty: it is not that the market lacks liquidity, but rather that there is a lack of "priceable policy paths." The main risk points facing the market revolve around the following three aspects:

1. Tariff retaliation: It is unclear how the United States will respond to China's countermeasures; additionally, it remains uncertain whether the European Union and other Asian economies will implement retaliatory measures.

2. Economic Data: Current market concerns about a recession are increasing. If tariff retaliation escalates, soft economic data may further suppress market risk appetite. However, the lag in hard economic data cannot reflect timely changes, which increases the difficulty of decision-making for the Federal Reserve, and market fluctuations may persist for a longer period.

Based on the conclusions drawn from the comprehensive interest rate market, risk market, and economic data, we believe that the overall market is still in an extremely fragile state. During this period of data unable to disprove, the market is unlikely to have strong upward momentum. However, it is important to note that according to members of the Trump administration, current tariffs are at the highest limit, and the upcoming negotiations may gradually establish a policy bottom for the market.

Based on the aforementioned analysis, our overall view is:

The current trading benchmark is: high inflation combined with tariff shocks, leading to a repricing of global recession expectations.

The synchronized decline in US Treasury yields (especially the plunge in SOFR forward rates) clearly reflects the "opening of policy space + enhanced macro pessimistic expectations"; the significant volatility in risk assets (US stocks, raw materials) reveals a severe lack of confidence in "priced futures"; alternative assets such as gold and Bitcoin, while possessing hedging logic, are still unable to strengthen independently due to liquidity constraints, reflecting that structural risks have not yet been cleared.

For cryptocurrencies, Bitcoin's dual characteristics of "safe haven vs liquidity sensitivity" have been fully exposed in this tariff crisis; if the Federal Reserve is forced to quickly ease, BTC may again be viewed as a "proxy asset for dollar liquidity" by funds; it is recommended to maintain a neutral stance, control leverage, and be aware of the market's short-term volatility.

The key macro data for next week is as follows:

Time

Data

Importance

Monday (April 7)

U.S. Treasury Bill Auction

Attention

Tuesday (April 8)

NFIB Small Business Confidence Index in March, USA

Important

Wednesday (April 9)

U.S. wholesale sales month-on-month in February

Important

Thursday (April 10)

U.S. March CPI

Important

Friday (April 11)

U.S. March PPI

general

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