US Weekly Report: Trump’s reciprocal tariffs to offer crucial test for markets

Trump’s reciprocal tariffs to offer crucial test for markets

The corrective bounce across major US indices was cut short last week by fresh tariff headlines from President Trump, as his long-promised tariffs of up to 25% on automotive imports reignited market jitters. Investors are increasingly recognising that exemptions for US allies may be harder to achieve, with Trump’s stance highlighting a shift from his first term—this time, he appears more willing to endure short-term stock market pain in pursuit of his long-term economic restructuring agenda.

As markets await clarity on “Liberation Day,” risk appetite remains subdued amid uncertainty over the scale and scope of the impending tariffs. With details still lacking, opinions remain divided on whether the recent equity market sell-off is still undercompensating for tariff risks. For now, the rhetoric from the Trump administration seems to dampen hopes for a lenient tariff announcement, with market participants likely to monitor closely on whether there is still leeway to achieve a more measured outcome ahead.

Look-ahead: US non-farm payrolls

On the economic calendar, market focus will be on the US non-farm payrolls report for insights into US labour market conditions. In February 2025, the US economy added 151,000 jobs, while the unemployment rate inched up to 4.1%. Job gains were concentrated in healthcare, financial activities, transportation, warehousing, and social assistance, while federal government employment declined by 10,000, reflecting a gradual labour market cooldown amid tariff uncertainties and widespread federal layoffs.

Looking ahead, with the Federal Reserve (Fed) projecting a year-end unemployment rate of 4.4% for 2025, any uptick from the current 4.1% could reinforce economic concerns. Current expectations point to further labour market softening, with payroll growth anticipated to slow to 137,000 in March, while the unemployment rate is expected to hold steady at 4.1%.

US 500: Bearish flag breakdown?

Last week’s sell-off appears to have confirmed a breakdown from a bearish flag formation, following a strong rejection at the lower channel trendline near the 5,687 level. This breakdown raises the risk of a broader downtrend ahead. Currently, the index is attempting to rebound from its March 14 low around 5,500, but stronger confirmation may still be needed to assess the sustainability of the move. A key signal for buyer control would be the four-hour relative strength index (RSI) reclaiming back above its midline.

Key Levels:

• R2: 5,785
• R1: 5,687
• S1: 5,595
• S2: 5,500

US 500 Cash chart:

Source: IG charts

Sector performance

The countdown to the US April 2 “Liberation Day” on tariffs prompted investors to shift toward defensive sectors over the past week, with consumer staples and utilities outperforming the rest. Meanwhile, expensive tech stocks bore the brunt of market de-risking once more, as lofty valuations remain under close scrutiny amid rising recession concerns. All of the Magnificent Seven stocks, except Apple, ended in the red, notably with NVIDIA plunging 10.7%, Alphabet down 8.1%, and Meta, Amazon, and Tesla all declining more than 6%. As uncertainty over the scale and timeline of reciprocal tariffs persists, risk appetite may remain constrained into the new week, reinforcing the appeal of defensive sectors as a hedge against portfolio volatility.

Source: Refinitiv

Source: Refinitiv

Source: Refinitiv
*Note: The data is from 25th – 31st March 2025.

Source: Refinitiv
*Note: The data is from 25th – 31st March 2025.

Source: Refinitiv
*Note: The data is from 25th – 31st March 2025.