​Tariffs remain a central issue in the current economic and political landscape, with the potential to reshape global trade dynamics. Their broad impact on inflation and supply chain stability cannot be overstated, as businesses brace for rising costs and logistical delays. However, it remains uncertain to what extent the proposed tariffs will ultimately be enforced. Many observers believe they are a strategic lever aimed at securing new trade agreements, though the coming month will be critical in determining whether actual progress materialises. The volatility of this approach is seen in President Trump’s latest high-profile announcement of 50% tariffs on EU goods, which was swiftly postponed. Adding further complexity, US courts recently ruled the administration’s reciprocal tariffs to be unlawful, raising questions about the legal limits of executive authority. The verdict has also already been appealed. Nevertheless, most market participants anticipate that, if politically necessary, tariffs will be implemented regardless of legal setbacks, and alternate legal routes are likely being explored. This legal and policy ambiguity has added a fresh layer of uncertainty to financial markets, contributing to heightened volatility and risk aversion. This significant uncertainty and potential impact have already had a significant impact on global growth expectations. These recent developments have led the IMF to adjust their growth forecast downward significantly, causing the world growth to slow down by 50 basis points. The US’ expectations are hit hardest with a downward adjustment of nearly 1%, as shown in Figure 1.

​Since President Trump announced a pause on tariffs in early April 2025, equity markets have rallied significantly. As shown in Figure 1, the S&P 500 rallied by more than 15% in the past five weeks and closed last week with a positive performance in 2025. Despite this rally, market participants remain hesitant, as uncertainties regarding the long-term effects of tariff policies linger. Goldman Sachs, while acknowledging the positive momentum, still projects a significant chance of recession, having recently reduced their recession probability from 45% to 35% following the tariff pause and recent trade developments.

​In early April 2025, President Trump reignited trade tensions with sweeping tariffs - 10% on all imports and up to 50% for countries with "unfair" practices, hitting China hardest at 145%. China retaliated with up to 125% tariffs, blacklisting US firms and restricting exports of rare earths. Facing global backlash, Trump announced a 90-day delay for most countries (excluding China) and eased tariffs on key sectors like tech and pharma. Markets, initially hopeful over pro-business policies, turned volatile as concerns over aggressive trade moves mounted. The VIX spiked to 60 on Liberation Day - levels not seen since 2008 and 2020. Upon the delay of the tariff implementation, volatility eased quickly, as shown in Figure 1. Volatility levels have dropped to below 25, which is only slightly elevated compared to historical levels.