Markets rallied last week off the back of the recent Supreme Court ruling that declared many of the Trump administration tariffs unlawful. However, the White House has maintained that it will proceed with a new global tariff regime. This includes a proposed 15% tariff on global imports, though the rate initially came into effect at 10% following the decision. The administration’s swift move to re-impose tariffs under a different legal authority initially unsettled markets, reflecting concerns about renewed trade uncertainty. However, by Tuesday traders were relatively subdued, with some adopting a more sceptical view that the most aggressive tariff measures may ultimately be softened or delayed (i.e.: the TACO trade). Investors are also aware that the new duties are temporary under existing statutory authority and face time limits, adding another layer of political and economic calculation in the months ahead.
In Japan, reports suggest the government is planning to establish a new centralised body modelled on the U.S. Committee on Foreign Investment. The proposal reflects Prime Minister Sanae Takaichi’s desire to shield Japan from certain foreign influences – particularly China, given its rapid and large-scale technological advances – while also reducing uncertainty for investors. At present, oversight of foreign investment is spread across a complex web of ministries under the Foreign Exchange and Foreign Trade Act, a structure widely seen as cumbersome and prone to delays. While economists have broadly welcomed the idea of streamlining the system, it remains unclear how much authority the government will ultimately grant the new body.
Meanwhile, in China on Tuesday, policymakers-imposed export bans on Japanese companies linked to defence or dual-use goods. The move prompted a decline in shares of major Japanese defence and industrial firms, reflecting investor concerns about supply chain disruptions and escalating already increasing tensions between the two countries.
Still to come this week we have Eurozone inflation, U.S. PPI and jobs data and earnings reports from tech chip giant, Nvidia, after the bell today.
Nicola Tune, Portfolio Specialist
