Trump has called reciprocal tariffs “a beautiful, simple system” where the US would charge its trade partners the same as they charge it. The deadline for US investigations to be completed under the Reciprocal Trade Act is 1 April. Tariff rate differentials with the US tend to be highest for EM, but equalising these differentials is unlikely to meet the US objectives of raising revenues or narrowing trade deficits. To make significant progress on either of these objectives, we think the US will look to target key trading partners like China and the EU. What we fear most is if Trump actually adds VAT, NTBs for his reciprocal tariff calculation. Current market pricing is not looking at that if we look at CME-London 6-month forward differentials for silver and platinum are, for reference, trading at only ~2-4% (implying a similar tariff rate), leaving them with substantial upside on April 2, and ultimately a with substantial potential upside should reciprocal tariffs be implemented over the next 6 months. These markets may be under-pricing tariff risks due to tariff fatigue, alongside the idea that these tariffs could be disruption for growth and therefore won’t be imposed. We believe there is significant tariff risk on 2nd Apr, hence we are more bullish on Silver than Gold. Because of tariff impact on global growth, we remain very bearish on crude. Tariff imposition matching VAT would have the greatest growth impact both on the US and the RoW given the sheer magnitude this would entail, with the growth outlook of nearly 70% of countries ex-US trimmed by 0.3% or more. We believe that the USD TWI is headed into April 2nd with minimal trace of tariff risk premium or positioning imbalance, for the first time since early 4Q24. We like long duration USTs (10yr USTs around 4.35 levels) and short USDJPY for an eventual target of 140 because if what we believe comes true, there is going to be a global risk off in 1st week of April which will take months to unwind as negotiations progress amongst US trade partners.
