Weekly Insights: Tariff Hard Landing, Fed Refuses to Play Along—Has U.S. Market Pressure Peaked?

Performance of Global Equity Indices(in US Dollar)

• Last week, global equity markets experienced extreme volatility under the pressure of Trump's tariff policy. In the U.S., the S&P 500, Nasdaq 100, and Russell 2000 indices all fell by nearly 10% in a single week. Japan and Europe were not spared either, each recording declines of over 6%. Due to the Qingming Festival holiday, Greater China markets were closed and thus did not fully reflect the expected drop in the data. Overall, market sentiment is currently in a state of extreme panic.

• The implementation of Trump’s tariff policy exceeded all expectations in intensity. On top of a 10% base tariff, country-specific surcharges were imposed, with China, Europe, Japan, and Southeast Asia among the hardest hit. In response, China swiftly announced retaliatory tariffs, while the Federal Reserve reiterated its stance of not rushing into rate cuts. This combination fueled market fears, leading to a wave of panic-driven sell-offs.

• This week, the key focus will be on the progress of tariff negotiations, as well as the release of March CPI/PPI data, which may determine the short-term direction of market sentiment.

Tiger Rotor Alpha Strategy

• Tiger Rotor Alpha Strategy is a multi-strategy, cross-cycle, absolute return investment strategy proprietarily developed by Tiger Fund Management. This strategy seeks to capture long-term excess returns by identifying expectation errors in the market and leveraging cyclical resonance. As of April 6

  , 2025, the portfolio’s major asset allocation breakdown is as follows:

Key Market Themes

Tariff Hard Landing, Fed Refuses to Play Along—Has U.S. Market Pressure Peaked?

• Last week, Trump’s long-threatened tariff hammer finally dropped, and the scale of the action exceeded all expectations, launching with what many considered a devastating “killer move”. A 10% baseline tariff was imposed on all global trade partners, followed by additional country-specific retaliatory tariffs: 34% on China, 20% on the EU, 46% on Vietnam, and 24% on Japan, among others. The market immediately plunged into panic, and the day after the announcement, U.S. stocks nosedived—the S&P 500 and Nasdaq each falling nearly 5% in a single session.

• This outcome aligns closely with the trajectory we had previously anticipated. First, never underestimate Trump’s commitment to tariffs. Second, he has a consistent pattern of using tariffs as a maximum-pressure bargaining tool. We saw this two months ago with Canada and Mexico, and now he’s repeating the strategy: lead with an aggressive move, then soften the blow with, “We welcome all nations to come negotiate.”

• However, Trump seems to have underestimated China’s resolve. On Friday, China announced a direct retaliatory tariff of 34% on U.S. goods, effectively mirroring the U.S. action. In addition, China suspended poultry imports from two U.S. companies. This triggered another wave of panic, and U.S. markets dropped sharply again, with both the S&P 500 and Nasdaq falling nearly 5%. The Nasdaq has now officially entered a technical bear market.

• However, the bad news doesn’t stop there. Last Friday, Powell’s speech once again dashed market hopes for a “Fed Put.” Despite Trump repeatedly calling on the Fed to cut rates and investors eagerly awaiting a dovish shift to support the market, Powell firmly reiterated that the Fed is not in a hurry to lower interest rates. He emphasized that uncertainty remains high, and that tariffs are having sustained impacts on both inflation and the broader economy—though he noted that current economic conditions are still solid. Powell made it clear that the Fed would wait for more definitive signals before considering any policy adjustments.

   

• At this point in time, rather than trying to predict every detail of Trump’s next policy move, it is more important to understand the broader macro environment and the overall direction. Since the beginning of this year, our Weekly Insights series has consistently focused on the three core uncertainties facing U.S. equities: tariffs, rate cuts, and politics. Understanding where these three stand today—and how they may evolve going forward—is key to determining whether U.S. equities can stabilize.

1. Tariffs: The worst-case scenario may have already played out. In the end, most countries are likely to choose negotiation and compromise, as only China and Europe have the capacity to engage in a full-scale trade confrontation with the U.S. Even if China and the U.S. escalate further this week, the actual economic impact will likely be much smaller, as there is little room left for things to get worse.

2. Rate Cuts: The probability of a May rate cut is now around 50%, and markets are pricing in four cuts for the year. Powell remains data-dependent, so if this week’s CPI and PPI data show signs of easing, it could significantly boost market confidence in the short term.

    

    

    

3. Politics: There are signs that the internal investigations led by Elon Musk are beginning to ease. Additionally, Trump has publicly acknowledged that Musk is expected to resign in the near future, suggesting a possible shift in the current political climate.

    

    

• In summary, we believe the market is currently in a phase of high volatility driven by the U.S.-China standoff, with the core tension centered on stagflation concerns and policy confrontation. In the medium to long term, this competitive dynamic remains unresolved, and the market’s trajectory is still uncertain.

  However, in the short term, sentiment may have reached a bottom, and a bullish rebound could be triggered by just one clear positive signal.