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Within an otherwise anodyne note from Goldman Sachs assigning a 45-per-cent chance to a recession, readers can find the following paragraph (with our emphasis):

If most of the April 9 tariffs do take effect, then the effective tariff rate will rise by an estimated 20pp once those increases and likely sectoral tariffs take effect, even allowing for some country-specific agreements at a later date. If so, we expect to change our forecast to a recession.

Doesn’t get much simpler than that!

The funny thing is, GS’s house view is still a ~15-percentage-point increase in tariffs on Wednesday, not the ~20-percentage-point one that was announced.

And even then, the bank sees greater recession risk than there was one week ago.

In other words, even if there is a rollback, it’ll be harder to shake the decline in confidence, and the very real fact that the US has now pissed off a ton of its major trading partners.

The bank puts it more mildly, citing a greater “sensitivity of financial conditions to incremental tariffs”, including the 34-per-cent retaliatory tariffs that China imposed on the US late last week.

It also cited the ongoing “sharp tightening in financial conditions” (ie stocks sold off), along with “foreign consumer boycotts, and a continued spike in policy uncertainty that is likely to depress capital spending by more than we had previously assumed.”

They cite the decline in travel and warn about consumer boycotts, which all seem very possible:

It also seems likely that the US’s habit of detaining foreign travelers for no apparent reason has contributed to the drop in tourism as well. Not to mention disappearing non-citizens for having tattoos, or for simply exercising their First Amendment rights.

Anyway, if there’s no recession and the tariffs are rolled back to just a 15-percentage-point increase, GS still expects three “insurance cuts” from the Fed this year.

If the tariffs do go into place on April 9, the economists at GS expect the Fed to cut around 2 percentage points over the next year. So cheaper mortgages, but also a recession . . . Quite the trade-off!

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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

You might have missed it, but April is “Financial Literacy Month” in the US. On April 1 (yes, really!) the White House released the following statement from Donald Trump:

During this National Financial Literacy Month, I urge families, communities, schools, and institutions to commit to bolstering their financial knowledge. There are amazing resources available to you and your family through the Department of the Treasury’s website that will assist you in making sound financial decisions. Together, we can all protect each American’s right to economic freedom, securing the promise of prosperity for generations to come.

Kudos to the White House for all all-time classic April Fool’s joke, and H/T Richard Metcalf for the spot. Anyway, here’s a selection of charts pilfered from various sell-side research notes that show how the US government’s sound financial decisions are securing the promise of prosperity for generations to come.

Tariffs up (zoomable image):

Stocks down (zoomable image):

Credit also clobbered (zoomable image):

Bigly moves pretty much everywhere (zoomable image):

Yet 10-year Treasury yield only down by 25 bps (zoomable image):

First-quarter earnings expectations fading (zoomable image):

Equity volatility up (zoomable image):

Uncertainty up (zoomable image):

Inflationary pressures climbing (zoomable version):

Unemployment expectations rising (zoomable version):

Business confidence down (zoomable image):

Bankruptcies already rising (zoomable image):

The GDP impact of tariffs (zoomable image):

Lots of rate cuts getting priced in (zoomable image):

But recession expectations still climbing (zoomable image):

Further reading:
— Global stocks tumble as Donald Trump offers no respite from tariffs (FT)

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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Before roiling global markets with his tariff plan last week, US President Donald Trump took a few moments to tout a decline in the price of eggs.

There was a very deep irony to this. Inflation in egg prices and other household staples probably contributed to his win. And for eggs specifically, the recent drop in prices was fueled by a yuge jump in imports.

In other words, America’s protectionist President imposed a set of baffling tariffs, targeted to reduce bilateral trade deficits, while trumpeting a price drop driven by two key trading partners.

The plan to import eggs was no secret during the peak of the price spike and shortages, when even Waffle House had to tap out. And to be fair, agricultural commodities aren’t what drive the biggest trade imbalances with the US, because they are often outstripped by electronics, other big-ticket items, or geographically-concentrated industries like textiles.

But it’s still an illustrative reminder of why trade can be useful. And we can now see it in more detail, thanks to data published late last week by the Census Bureau and USDA.

Two countries stepped into the birdflu breach in February: Turkey and Mexico. They exported more than four times as many eggs that month as they did the prior year, according to the USDA.

From the USDA’s latest weekly egg-market report, published Friday (with our emphasis):

Overall imports of shell and egg products exploded in February as the domestic market sought relief from reduced production resulting from persistent outbreaks of highly pathogenic avian influenza in the first two months of the year.

Overall volume was up 551 percent; 404 percent over a year ago. The overall value of imports was similarly higher, up 328 percent for the month and 450 percent for the year. Imports of table shell eggs increased 478 percent with Turkey and Mexico contributing at a 60/40 split. Imports of liquid egg products were down 13 percent for the month but 43 percent over year ago levels. Imports of liquid whole egg were down 15 percent as shipments from Vietnam slowed. While imports of liquid yolk declined 33 percent as trade with Canada slowed. Only liquid albumen posted an increase, up 30 percent and all from Canada.

There’s a real lesson here, we think. Plenty of ink has been spilled already about how trade provides commodities that a country doesn’t have (eg diamonds or bananas).

This shows that trade also can protect from supply shocks in commodities and goods a country does have. Like, say, an outbreak of disease. One can argue about how much the price pinch was exacerbated by issues besides bird flu — like monopoly power and factory farming — but $8 for a dozen eggs is inarguably rough maths!

On the bright side, the US has only imposed a 10-per-cent tariff on Turkey because it had a relatively small trade deficit with the country (around 9 per cent) in 2024.

As for Mexico, it isn’t entirely clear whether egg imports from Mexico are all considered compliant with the USMCA. If they are, they would dodge all tariffs under the new regime. But Mexico only provided a small portion of the eggs that the US was importing.

Next outbreak, the US will simply have to ask skincare brand The Ordinary to start egg pop-up sales all over the US.

Another bit of irony: that company is based in Canada, which imported nearly $97mn of eggs from the US in January and February.

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The stock market car crash is naturally dominating attention. After all, this is only the fourth two-day 10 per cent decline since at least 1952. But the more alarming developments are happening in currency markets.

The DXY dollar index has bounced a little today, but the growing sense of unease about its trajectory is nearly palpable. Yesterday, we wrote of Deutsche Bank’s concerns that we should “beware a dollar confidence crisis”, and this morning Société Générale sounded a similarly dour now.

As SocGen’s chief FX strategist Kit Juckes pointed out earlier today, the US dollar’s exceptionalism has been powered by gargantuan inflows of foreign money over many many decades. “That money is thinking about packing its bags and heading somewhere else,” he warned.

The BEA puts the end-2024 US net international investment deficit at USD 26.2 trn (and the sum of assets and liabilities at USD 88trn). Anything that scares foreign investors away from US assets can have a bigger negative impact on the dollar than a shift (even a sizeable one) in the price of import and exports.

However, it’s not just European strategists at European banks dissing the American dollar. Goldman Sachs’ FX team are out with a new call this evening, and it’s a big one. They now see the US dollar’s weakness “persisting and deepening further”.

The trigger is not, per se, the extreme level of the “reciprocal” tariffs that the Trump administration rolled out this week, which they say were incorporated in its previous forecasts. Goldman’s changing view has more to do with its sharp reappraisal for what the new regime means for the dollar.

Like many other analysts, Goldman’s previously reckoned that tariffs would buoy the dollar. Now it thinks otherwise, “for a number of reasons”. Alphaville’s emphasis below:

First, the combination of an unnecessary trade war and other uncertainty raising policies is severely eroding consumer and business confidence . . . so that any Dollar positive impulses are being offset by the likelihood of lower growth.

Second, the negative trends in US governance and institutions are eroding the exorbitant privilege long-enjoyed by US assets, and that is weighing on US asset returns and the Dollar, and may continue to do so in the future unless reversed.

Third, and related, the implementation of the tariffs themselves is eroding the ability of investors to price these. While it is still true that currencies (and Dollar strength) provide the most natural margin of adjustment to US tariffs, as was the case both in the first trade war and also in the first episode of Canada/Mexico tariffs in late-Jan/early-Feb, the constant back and forth on timelines and the rudimentary calculations compound the uncertainty that underpins rising recession risks.

Moreover rather than clearly targeted tariffs that allow precise room for negotiation, with such broad, unilateral tariffs there is less incentive for foreign producers to provide any accommodation — US businesses and consumers become the price-takers, and it is the Dollar that needs to weaken to adjust if supply chains and/or consumers are relatively inelastic in the short term.

The upshot is that Goldman’s new base case is now the dollar’s “exceptional” position over the past decade is now reversing, which will benefit the euro and the Japanese yen in particular.

In forecasting terms that means the EUR/USD exchange rate will go to to 1.12, 1.15 and 1.20 over the next three, six and 12 months (from 1.07, 1.05 and 1.02 previously) while USD/JPY will go to 138, 136, and 135 in three, six and 12 months (from 150, 151 and 152 previously)

However, the most interesting part of the note is that even Goldman Sachs is becoming worried that the sun may finally be setting on America’s famous “exorbitant privilege” (and is willing to say so publicly).

That might be a little premature, but we can begin to freak out if we ever see multiple days of US Treasury yields rising and the dollar falling in tandem. That would be a pretty clear sign that some of that $26tn NIIP is truly heading for the exit.

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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

To mark the new era of things staying where they are, this week’s chart quiz is about international trade.

The charts below show imports and exports by country and dollar value. Your task is to name the three commodities/commodity classes shown:

It’s sort of a no-budget version of the OECD’s Tradle game, except we’re giving away a T-shirt rather than asking you to buy one, and maybe it helps to know the answers are on a theme.

Email your guesses with QUIZ in the subject line. One correct entry will be drawn at random for the prize of a not-available-to-buy Alphaville chart-quiz-winner T-shirt.

We usually name correspondents who get all the answers. If you don’t want that to happen, be sure to tell us. The deadline for entries is whenever we get around to it on Monday and the judge’s decision is final.

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Your guide to what the 2024 US election means for Washington and the world

Normally, it wouldn’t be unusual to have a Federal Reserve chair — or any Fed official — say they plan to serve out their full term.

As we keep saying, these are not normal times.

So it’s notable that Fed Chair Jay Powell said Friday that he plans to remain in his role. If this week is any indication, the next year seems like it could be a rather . . . important period for US price stability. And employment. And financial stability, for that matter.

“I fully intend to serve all of my term,” Powell said in a Q&A with the Society for Advancing Business Editing and Writing, or Sabew.

It wasn’t 100-per-cent clear what exact period of time he meant: he’ll be chair of the rate-setting policy committee until May 2026, but his full term on the Board of Governors continues until January 31 2028. (He has previously declined to answer the question of whether he’ll stay until 2028.)

One reason this is interesting: If he does plan to stick around until 2028, Fed Board members serve on the rate-setting policy committee, so this would give him continued (if somewhat diminished) influence over monetary policy after the end of his leadership role.

Another reason that’s maybe more pressing: There seems to be a nascent conflict between him and the US President about rate policy.

Minutes before Powell started speaking at the Sabew event, President Trump posted that it would be “a perfect time” for the Fed to cut rates. This certainly breaks decorum, and in the past, presidential comments about rates have been interpreted as an assault on the Fed’s independence (which has only really existed since 1951, and was not imposed by Congress).

But the White House is making far more aggressive intrusions into other agencies’ independence. And it’s been threatening an aspect of independence that has the legal protection of being created by Congress: Personnel, and their terms of service.

The Trump Administration dismissed two Federal Trade Commissioners last month, despite a 1935 ruling that says the president doesn’t have “illimitable power of removal” for agencies created by Congress. This was in a case specifically about the FTC.

Still, Powell doesn’t seem too concerned about monetary policy input from the US President at the moment.

“It feels like we don’t need to be in a hurry” to cut rates, he told Sabew. Stocks didn’t have a huge reaction to that news in real time, though, so it doesn’t seem like investors were waiting on Powell to save their bags.

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Funny how stuff comes together sometimes.

Last month, mainFT’s Valentina Romei and our very own Robin covered how a January surge in US gold imports by traders trying to get ahead of tariffs had temporarily broken the Atlanta Fed’s GDPNow model, leading it to indicate a looming recession. The culprit behind the leap in “finished metal shape” (aka gold bar) imports was Switzerland.

And if you’re a Swiss cheese exporter with a large US clientele, that could end up mattering a lot, depending on the future whims of the White House.

The reason is simple — again, in a stupid kind of way. We’ve dwelled a lot upon how inane the Trump Administration’s “discounted”, “reciprocal” tariff calculation is.

If you’ve somehow missed it, it’s broadly (with some exceptions, including a blanket 20 per cent levy on EU goods): take America’s 2024 trade balance with a country, divide it by the amount the US imported from that country, divide the result by two, and make that the tariff percentage. If the percentage is below 10, make it 10. Sorry to the UK.

It’s a crude mechanism, and one that produces particularly wild results for smaller economies that often simply sell the US things the US can’t make or grow itself.

But it’s easy to get caught in the stupefying simplicity of the calculation, and ignore the stupefying simplicity of the data pool. Justifying the tariffs, the USTR release says:

The failure of trade deficits to balance has many causes, with tariff and non-tariff economic fundamentals as major contributors. Regulatory barriers to American products, environmental reviews, differences in consumption tax rates, compliance hurdles and costs, currency manipulation and undervaluation all serve to deter American goods and keep trade balances distorted. As a result, U.S. consumer demand has been siphoned out of the U.S. economy into the global economy, leading to the closure of more than 90,000 American factories since 1997, and a decline in our manufacturing workforce of more than 6.6 million jobs, more than a third from its peak.

So how better to assess that epochal, multi-decade economic shift than by extrapolating an entire policy from only 2024 data?

Back to Switzerland. Exports of goods deemed Swiss to the US face a reciprocal tariff of 31 per cent — markedly higher than that flat 20-per-cent EU rate — reflecting $64bn of Swiss exports to the US and a trade surplus of $39bn against the Americans in 2024.

Now, the GDPNow-distorting influx of gold fell within 2025, but the US also saw less extreme “finished metal shapes” jumps last year that lined up with rises in imports from Switzerland. In short, the overall Swiss 2024 numbers also seem to be unusually swollen by the yellow stuff.

So how different might Wednesday’s tariff announcement have been if “Liberation Day” had been this time last year, based on 2023’s figures, or in another recent-ish year? Well, quite a lot:

It’s a tough break for Swiss cheesemakers and clockmakers, who now face a bigger tariff barrier than they might have got in 2024 or 2023. But could things get worse?

Let’s imagine “Liberation Day” becomes an annual occurrence — a federal stock-market holiday, even! — and on April 2, journalists gather in the Oval Office as the President presents updated tariffs based on the same formula. This would probably create all kinds of odd situations around countries trying to game their trade stats, but for now let’s hand-wave that away.

Over enough time, this could mean the long-term average tariffs paid are “fairer”, insofar as the (crude, unfair) tariffs would at least not be biased by any potential oddities of a single year, 2024.

Of course, rates could still end up biased by a series of other potential oddities from other individual years. That potential volatility would force exporters to the US to plan for a future in which the price of their goods fluctuates wildly each year based on their country’s annual trade balance. Not great for planning.

But there is no clear plan for “Liberation Day” to be an annual occurrence, of course. These tariffs are supposedly going to be the baseline for the rest of the Trump Administration; or until President Trump changes his mind; or possibly forever, depending on how confident you feel about the strength of US institutions. In other words, 2024’s trade data might end up mattering for a long time. Who might then appear be victim of timing, and who might have just got lucky?

Well, here are all the countries for whom FT Alphaville could get enough sequential data to roughly answer that question. Relatively bigger 2024 column compare with previous years = more hard-done-by. Relatively smaller = a good year to be tariffed on:

(Note that in this and the subsequent diagrams we’ve shown EU countries as disaggregated, ie they get a variable 2020–23 implied rate and only receive the blanket 20 per treatment for 2024.)

Sequencing them by the spread between 2023’s implied rate and 2024’s actual rate, things look tough for Vanuatu and Laos (and we’re left wondering what happened in Comoros last year):

We will concede that the Y-axis labels above are unforgivably small, but we refuse to change that because 2023 is of course equally flawed as a single year to look at.

A mildly better way to assess fairness is to compare the applied tariffs to some kind of average. So now that we understand the system, let’s compare the announced rates with an theoretical average over five years (even though that will capture some pandemic-era jankiness):

Vanuatu . . . ouch. Assuming its trade relationship normalises to recent trends this year, Vanuatuan exporters should really hope Liberation Day does become a regular thing.

Swiss cheesemakers may feel differently. As a reminder, here’s how the US/Swiss trade relationship shifted in January:

Managing roughly half an ordinary year’s worth of exports to the US in a single month means — if Liberation Day does return — that Switzerland could be on track for a horrible tariff recalculation.

If so — and unless there’s a monumental reversal over the rest of this year — then 2 April 2026 would be a bad day in the Swiss dairy.

Further reading:
— O dirang, Donald? (FTAV)
— Reciprocal tariffs: You won’t believe how they came up with the numbers (FTAV)
— The stupidest chart you’ll see today (FTAV)
— Academic citation malpractice, reciprocal tariffs edition (FTAV)

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‘Liberation day’ proved suboptimal for the stock market. The S&P 500’s 4.84 per cent decline was the 23rd biggest since at least 2000, and a larger drop than the one that followed Lehman’s bankruptcy in 2008. Nice.

By the look of Asian and European markets and US futures, today is going to be another bad day, with even Wall Street’s more cautious and circumspect analysts sounding pretty morose right now.

However, like Pavlov’s dogs, retail traders have been conditioned for years to buy the f***ing dip, and this they did in size yesterday. From JPMorgan’s equities team overnight, with their emphasis below:

Despite a sea of red, retail investors stood firm and not only bought the dip but did so at a historic pace. They ended today with +$4.7B of net buying, the largest level over the past decade and +4.4z above last 1Y average. Throughout the day, they bought aggressively at 11am when the market dipped briefly, then gradually sold as the market recovered.

Inflows were remarkably balanced between ETFs (+$2.4B) and singles (+$2.3B). Initially, inflows were spread across multiple names in the first half of the day, but gradually concentrated into Retail favorites (i.e. longer term buy and holds).

. . . . Although the market has undergone its worst 1D performance in five years, the response by Retail investors stood in stark contrast to the 2020 COVID sell-off. At that time, they largely exacerbated the existing institutional selling, with ~75% correlation between market performance and their subsequent flows. Even on days they did decide to step in, they did not have the confidence to pick stocks but instead opted for more diversified ETF exposure, leading to a high ETF-to-singles ratio.

Interestingly, retail traders actually dumped Tesla stock yesterday, despite it being the standout BTFD fave of 2025 so far. In fact, it was the only Mag7 stock that suffered net selling.

Unfortunately, even a record $4.7bn of net buying wasn’t even near enough to provide even a little bit of support for the market, given the massive amounts of selling that institutional investors conducted.

As JPMorgan’s equity derivatives analysts noted yesterday, leveraged ETFs alone probably sold about $22bn of stocks in the US stock market’s closing auction. More selling is inevitably coming from various investment strategies that tie their net exposure to the level of volatility. JPMorgan estimates that up to $20bn could be dumped by vol-targeting investors “over the next few days”.

Moreover, retail traders have not enjoyed a lot of success lately, with JPMorgan estimating that they are collectively down nearly 13 per cent so far in 2025, compared to the S&P 500’s 8.3 per cent decline.

Getting absolutely creamed in 2022 failed to break the BTFD mentality, but a few more weeks like this and they might begin to buckle.

Further reading:
— Stock trader head in hands (Alamy)