April 1 – It’s “April Fools Day” today, which is why President Trump said that he would not announce his reciprocal tariff plan today. Instead, he will announce it tomorrow, on what he is calling “Liberation Day.” We should get information from the White House setting up the justification for what will happen tomorrow, which could drive some market action, depending on how it is interpreted. Yet, caution will likely be the key today, ahead of tomorrow’s reciprocal tariff announcements. Stock futures came under pressure again overnight as traders position for those announcements. The VIX firmed to trade near 23 overnight, while the dollar index traded near 104.3. Treasury yields on are slipping today as money flows toward government securities, while commodity prices firm.
The Trump Administration told us that reciprocal tariffs will simply put a tariff on each trading partner that we do business with that matches what they currently charge us, for the purpose of getting them to negotiate it down. As such, the expectation has been that we would get a detailed list of countries with different tariffs attached to them. President Trump stated that he has signed off on the plan that will be unveiled tomorrow. The markets reacted negatively overnight to a media report that the plan has tariffs of “about 20%” on most of the goods that we import into the States. That had the sound of more of a flat tariff in the minds of traders than it did a country-specific reciprocal tariff. There are more than 100 countries that don’t charge us a tariff, but most of our major trading partners do so. Some sources close to the White House also state that the Administration is considering a tax dividend or refund from a portion of the revenue collected by the tariffs to offset the inflationary aspects of the tariffs, while also helping to stimulate the economy. It will be critical that Trump do something to win back the confidence of the consumer in the weeks ahead, if he’s going to succeed in restructuring the economy as he desires.
U.S. Trade Representative Jamieson Greer is expected to release several reports ahead of tomorrow’s tariff plan designed to set the stage for those plans. One of those is expected to focus on a review done on China’s permanent normal trade relations (PNTR) status with the United States that’s been in place since 2020. One of the keys to watch will be whether President Trump revokes China’s PNTR status in connection with his belief that China’s practices have helped to erode the U.S. manufacturing sector, with many companies now sourcing products from China. The USTR is also expected to release an assessment of whether Beijing followed through on its pledges contained in the Phase One trade deal inked during Trump 1.0. The above is expected to set the tone for whatever tariffs that Trump might apply to China that could be above and beyond the 20% that he implemented recently.
China launched yet another large-scale military drill around Taiwan today, including Shandong aircraft carriers, focusing on combat readiness drills that included mimicking seizing comprehensive control of the island nation, striking maritime and land targets, imposing blockades on key areas and routes, etc. Beijing stepped up the schedule of military drills surrounding Beijing following the election of independence-leaning William Lai Ching-te Lai to president in May 2024. Today’s drill was triggered by Lai’s recent reference to the mainland as a “foreign hostile force,” and his government announced 17 measures last month that China saw as offensive, including tightening restrictions against residents and officials coming from the Mainland, Hong Kong, and Macau. The presence of these military drills increases the risk of escalating military confrontation with the United States, which has promised to help defend Taiwan’s from Beijing’s military threat.
Locally heavy rains are expected to disrupt early planting progress in the days ahead from the Delta up into the southern Ohio River Valley, with some areas potentially seeing up to a foot of rainfall. Considerable flooding is expected across the region where these heavy rains fall, with some severe weather expected in the region as well. The rains will help to refill dry subsoils for the growing season ahead, but they will create some challenges in the meantime. The current weather pattern does increase the chances that we could see some very beneficial rains – and even snows – in currently dry portions of the central and southern Plains as well as we move through the remainder of the week. That moisture would be very timely for giving the crop a much-needed boost as we head into the critical reproductive phase for the winter wheat crop. Further south in Brazil, we continue to see timely showers boost yield prospects for the winter (safrinha) corn crop. The four provinces of Mato Grosso, Mato Grosso do Sul, Goias, and Parana account for 85% of the crop’s production. A check yesterday showed that satellite-derived NDVI scores from this region have surged to their highest level of the past 20 years for this week of the year, responding to those rains. Unfortunately, a drier pattern is now expected to return, expanding crop stress from the current 25% of the belt back toward 50% of the belt once again as it approaches the critical pollination phase of development. Meanwhile, harvest is slowly picking up momentum in Argentina.
