April started off with Trump laying out his global tariff plan, dubbed »Liberation Day«. Nobody expected anything good from this but few could have imagined Trump would take out a flamethrower and burn global trade relations to a crisp. The tariffs were larger and broader based than expected, namely a 10% tariff rate on all US imports and higher "reciprocal" tariffs for countries with which the US has a large trade deficit.

Ironically that means that the US raises the highest import tariffs on those countries whose products they depend the most on – primarily countries where US companies have their production lines outsourced due to low labor costs, like China and Vietnam whose reciprocal tariffs were as high as 46% and 54% respectively. Also imports from the EU would receive a 20% tariff. No country was left off the list, except Russia…

By applying these tariffs, Trump is effectively shooting American companies and consumers in the knee caps as products become far more expensive and higher prices are carried over to US consumers. This would increase inflation, reduce consumer spending and potentially trigger a US recession.

The reaction on the stockmarket was swift with US indices losing close to 6% the day after the announcement, the steepest single-day decline since the COVID crash in 2020. There was also a spillover effect into the global markets on concern that a reduction in exports to the US would weight on economic growth in other countries.

As stockmarkets continued to drop and the US apparently realized that declaring a trade war against the whole world may not have been a bright idea, Trump then decided to suspend the new tariffs for 90 days for most countries while negotiations take place, and this helped shares recover. In April the Dow Jones lost 3,17%, the S&P500 lost 0,76% and the Nasdaq managed to close 0,85% in plus.

The Federal Reserve kept the interest rate unchanged on concerns that the tariffs may cause inflation to pick up steam again.

The dollar however lost 4,73% against the Euro and devalued against most global currencies – when you have an impulsive US president recklessly distorting global trade, investors tend to shift their money into more reliable economies. The dollar weakness and market uncertainties were certainly good news for gold which reached a new all-time-high just above $3500 per ounce. The oil price however saw a significant drop of 18,56% to 58,21$ per barrel on demand concerns.

Also European stock markets dropped a bit with the Eurostoxx losing 1,68% throughout the month. The German DAX index managed to gain 1,50% while France's CAC index lost 2,53%. Slovenia's SBI index remained relatively unchanged, closing at 2014,05.

Among the worst markets in April were China and Hong Kong. That's because the tariffs on China imports were NOT postponed for 90 days. While most countries pleaded with the US to drop the tariffs, China wasn't messing about and decided to immediately raise counter tariffs on imports from the US, triggering an escalation of increasing tariffs. China's exports to the US are currently being tariffed at a staggering 145%. This had an immediate impact as the number of container ships heading to the US virtually grinded to a halt. Shipping ports in the US, normally filled up to capacity, are now literally sitting empty and soon stores in the US could once again have empty shelves.

On a final note, the first estimate of US GDP growth for the first quarter of 2025 has been released and came in negative at -0,3%, down from +2,4% in the last quarter of 2024. The impact of the tariffs will only be seen in the second quarter. If the US wants to minimize the damage to its own economy, then they'd better stop playing games. New trade deals are being forged between Europe, China, Canada, Australia, Japan and others to reduce their reliance on the USA. The global economic landscape is beginning to shift.

Rudy Marchant
Fund manager Primorski skladi

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