Michael Konstantinou: Trump's tariffs "worse than the market expected across the board"

The tariffs imposed by US President Donald Trump this week were worse than the market was expecting, according to Michael Konstantinou, Senior Portfolio Manager at Athlos Capital, who says the question now is, will the affected nations attempt to negotiate, or instead retaliate?

Speaking to CBN, the expert also warned: "The fact is that the longer it takes to clear up the final tariff values the worse it is for risk assets."

But what is quite intriguing, Konstantinou added, is the movement of the USD currency, which is currently depreciating by 1.25% versus the euro, which he said is "something that we don't tend to see in falling markets".

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Moreover, on the fixed income side, "we are seeing more worries of a global growth scare reflected into the market with 10-yr US Treasuries trading at 4.07%, 13 bps tighter overnight".

Referring to the tariffs announced by Trump on 2 April, Konstantinou said they were "worse than the market expected across the board. He has imposed steep tariffs on all exporters to the US, with a 10% tariff on most countries and higher duties on 60 nations to counter large trade imbalances with the US."

Indeed, Trump's plan sets a baseline tariff of 10% on all imports; but other allies will face new tariffs, including 10% for the UK and 20% for the European Union. As for China, the measure introduces a new 34% tariff on goods from the country, on top of an existing 20% levy, bringing total duties to at least 54%.

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"The move in the markets today (3 April) shows signs of escalation, which may eventually result in significant economic implications," Konstantinou further explained. "At the time of writing this article, the US equity indices are down 2.5-3.5% with European Equity indices outperforming, trading down 1-1.5% on the day."

The 10% baseline charge is expected to start on 5 April, with the higher duties on targeted countries due to kick in on 9 April.

"The question that now arises is whether there will be a negotiation or a retaliation tactic by the nations which have been mostly negatively impacted," the expert says. "So far, we are seeing a mixed picture of responses across the globe hence the muted response in the global equity markets."

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