President Donald Trump is set to announce his tariff policy on Wednesday at 4:00 p.m.
Markets opened lower on Wednesday, jittery over President Donald Trump’s plan for reciprocal tariffs, which will be announced Wednesday at 4:00 p.m. ET.
While it is not yet clear what the tariffs will look like, Trump administration officials have said in recent days they will be broad-based, focused on the countries where the imbalances are highest. According to reports from CNBC, it could impact 20 countries, including China, Canada, Mexico, countries throughout the European Union and Asia, as well as some in South America. Note, it is not clear yet which countries the tariffs will be imposed on.
According to CNN, the administration was weighing three options – a 20% universal tariff on all imports; a tiered system with flat rates for some countries and higher rates for others; and a plan that would assign individual rates to each country, based on their own tariffs on U.S. imports.
Trump contends that the tariffs will level the playing field for the U.S. with its trading partners, encourage domestic manufacturing, and boost revenue, among other outcomes.
But investors have bristled at the plan, as the stock market just completed its worst quarter in three years, with the Nasdaq down 10% and the S&P 500 off nearly 5%. Further, economists have raised concerns that higher tariffs could increase inflation, limit job growth, slow the economy, and potentially lead to a recession.
Investors flock to gold as a safe haven
Eugenia Mykuliak, founder and executive director at B2Prime Group, a global financial services provider for institutional clients, expects tariffs to lead to more market volatility.
“Businesses will need to reassess their supply routes, leading to capital outflows from emerging markets and increased market volatility,” Mykuliak said. “As such, wary investors will naturally seek refuge in safe-haven assets, with gold being the most obvious one to benefit from this shift. Central banks and institutional investors are already increasing their gold reserves, and while the uncertainty lingers, gold’s upward price trajectory is likely to continue.”
Gold prices have skyrocketed this year in the face of sinking stock markets. Gold prices have risen some 18% year-to-date to an all-time high of $3,168 per ounce – and they were rising again on Wednesday.
The potential impact on inflation and rates
Mykuliak added that the tariffs could strengthen the dollar in the short-term, as part of the migration to safe-haven assets. But that could change over time.
“However, in the long term, tariffs could result in raised consumer prices, straining economic growth and international trade relations. And that, in turn, could lead to the dollar somewhat weakening,” Mykuliak said. “Moreover, the share of the dollar in international settlements is likely to decline as countries seek alternative trade mechanisms due to tariffs, sanctions, and overall uncertainty. This will have long-term implications for the dollar and may accelerate the decline of its dominance on the global stage.”
Tariffs could also pose challenges for the Federal Reserve and central banks, if they push inflation rates even higher, Mykuliak said. The Fed has historically raised interest rates to slow down inflation, like it did in 2022.
“They are already navigating a problematic landscape of inflationary pressures and economic slowdown,” Mykuliak said. “By increasing the cost of imported goods, tariffs could further fuel inflation, making it harder for central banks to justify rate cuts later this year.”
She added that while tariffs are not a direct driver of monetary policy decisions, they introduce additional uncertainty around inflation, which could shape the Fed’s decisions.
In addition, Mykuliak said the current environment signals a fragmentation of global trade and a shift away from trade organizations like the WTO.
“In the long term, I believe we will be seeing regional trade blocs crop up with more localized networks,” Mykuliak said.
Investors will know more later on Wednesday when the reciprocal tariffs are announced, along with any ensuing retaliatory tariffs from impacted nations.
