What is the impact of the implementation of equal tariffs?

1. Macro Review of This Week

1. Market Overview

This week, the equivalent tariffs have been implemented, but they far exceed market expectations, leading to a sharp decline in global risk assets.

The S&P 500 Index fell a total of 10% over two days, marking the largest decline since March 2020; the Dow Jones dropped 7.6% over the week, and the Nasdaq entered a bear market. The semiconductor ETF plummeted 16% in a week, its worst performance since 2001. The VIX index surged above 40 at one point, reflecting extreme short-term panic in the market.

The 10-year government bond yield plummeted 32 basis points to 3.93%, hitting a new low since September 2022; spot gold rose to $3,023/ounce before retreating, with a weekly decline of 1.7%; the dollar index fell 1.1% for the week.

Brent crude oil plummeted 10.4% to $61.8 per barrel, as concerns over increased production and demand resonate. Copper prices fell 13.9%, marking the largest weekly drop since July 2022; iron ore decreased by 3.1%.

Bitcoin experienced a brief divergence from the US stock market this week, rising after the implementation of reciprocal tariffs, but then fell again after China introduced countermeasures, with an overall decline that was smaller than that of the US stock market. This reflects the dual contradiction of Bitcoin's safe-haven and risk attributes.

2. Economic Data Analysis

2.1 Equal Tariff Analysis

The content of the equivalent tariff mainly consists of two parts:

• Set a minimum benchmark tariff of around 10% for traditional trade partners.
• Impose higher tariffs on specific countries and regions, mainly in Asia. China 34%, Indonesia 32%, Vietnam 46%, Thailand 36%, South Korea 25%, Japan 24%. The European Union increased by 20%.

Analysis of the Political Objectives of Tariffs:

• Build legitimacy and seek congressional support
• Layout of external negotiation chips to accelerate the return of manufacturing.

Tariff characteristics: simple and rough while leaving room for negotiation. The only thing that requires special attention is the countermeasures from China and the European Union, and it is expected that the Sino-U.S. game cycle will be significantly prolonged.

2.2 Non-Farm Data

The non-farm employment shows a surface stability but weak structure.

• Official unemployment rate is 4.2%, U6 rate is 7.9%
• The total number of employed people in January and February was revised down by 48,000.
• The unemployment rate has risen for two consecutive months.
• The average hourly wage increase continues to slow down.
• The labor participation rate remains low.

While it cannot be denied that the U.S. labor market is fundamentally robust, the structural outlook is not optimistic, and the market's expectation of a "full cooling" has yet to arrive, with signs of deterioration accumulating.

3. Liquidity and Interest Rates

The SOFR 12-month term rate has clearly declined, indicating that the market expects the Federal Reserve to be more likely to cut interest rates sooner. The yields on 2-year and 10-year U.S. Treasury bonds have rapidly declined in sync, and the market as a whole has entered a "pricing recession" phase.

Powell's speech was generally cautious, acknowledging the existence of stagflation difficulties, but suggesting that "wait and see" remains the main tone.

2. Macroeconomic Outlook for Next Week

The main risk points facing the current market:

1. Tariff retaliation: The response of the United States remains unclear after China's countermeasures, and it is still uncertain whether the EU and Asian economies will have retaliatory measures.
2. Economic Data: Increasing concerns about recession, with inconsistent responses from soft and hard data making decision-making more difficult.

The overall market is in an extremely fragile state, and there is unlikely to be strong upward momentum in the short term. However, the easing of tariff negotiations may gradually establish a policy bottom for the market.

Overall view:

• Current trading benchmark: High inflation combined with tariff shocks has led to a repricing of global recession expectations.
• The decline in U.S. Treasury yields reflects the opening of policy space and an increase in macro pessimistic expectations.
• The significant volatility of risk assets reveals a severe lack of confidence in a "priceable future".
• Alternative assets may have a hedging logic, but they are still unable to strengthen independently due to liquidity constraints.

For cryptocurrencies, it is advisable to maintain a neutral stance, control leverage, and pay attention to the market's short-term volatility. If the Federal Reserve is forced to quickly ease, Bitcoin may once again be seen as a "dollar liquidity proxy asset."