Global investors inched closer to getting some clarity on the Trump administration's tariff plans Wednesday, but with little detail on what to expect, financial markets remained volatile.
U.S. President Donald Trump has for weeks pegged April 2 as "Liberation Day," when he plans to impose an array of new tariffs that could upend the global trade system.
As of 2:37 p.m. EST, the S&P 500 was up 17.33 points, or 0.31%, the Dow Jones Industrial Average gained 92.29 points, or 0.22%, and the Nasdaq was up by 87.69 points, or 0.52%.
Tariffs could have big implications for corporate earnings, global growth, inflation and Federal Reserve interest rate policy.
Investors had kicked off the year with high hopes for pro-growth policies from the Trump administration but have been spooked by a barrage of tariff-related headlines.
While investors broadly agree that Wednesday's long-awaited announcement could be pivotal for the near-term outlook for global financial markets, they are unsure about which way prices will swing and what will come next as negotiations could be protracted.
DO NOT BET AGAINST THE US
"I can't recall a situation where the stakes were this high and yet the outcome was so unpredictable," said Steve Sosnick, chief strategist at Interactive Brokers. "The devil is going to be in the details and nobody knows the details."
Some investors acknowledge the heightened uncertainty and disruptions but do see it as short-term pain for longer-term benefits to U.S. manufacturing.
"Tariffs have the potential to be inflationary in the short term. None of these countries can go toe to toe. It's going to be bumpy," said Stuart Thomas, founding principal at Precidian Investments.
"But long term, I would not want to be betting against the U.S. dollar or the U.S.," Thomas said, pointing also to the Trump administration's energy policy and deregulation push.
U.S. stock indexes edged up in choppy trading after opening the session sharply lower Safe-haven gold held near record highs and European shares fell on Wednesday, with the STOXX 600 benchmark down 0.5%.
The White House said on Tuesday that Trump will impose new tariffs on Wednesday, without providing details about the size and scope of trade barriers that have businesses, consumers and investors fretting about an intensifying global trade war.
White House spokesperson Karoline Leavitt said reciprocal tariffs on countries that impose duties on U.S. goods would take effect once Trump announces them, while a 25% tariff on auto imports will take effect on April 3.
Lack of clarity on whether there will be one flat tariff rate for all imports or whether the administration takes a more fragmented approach has made modeling the ultimate impact of the tariffs on earnings, growth and inflation a daunting challenge.
"The range of outcomes can be categorized as good, bad and the ugly. A good surprise would be if there aren't as many tariffs or if they are more targeted and reciprocal," said Brian Mulberry, portfolio manager at Zacks Investment Management.
"The bad would be if they are more heavy-handed in their approach, including sanctions, and the ugly would be if there is a 25% tariff across the board," Mulberry added.
Wednesday's announcement feels particularly crucial after the S&P 500 confirmed a correction, a drop of 10% from a recent high, in mid-March. The index was last down about 8% from its February record high.
"We are at a very tenuous spot, being at the bottom of a corrective trading range ... that leaves us poised for either a very sharp bounce or a scary breakdown," Sosnick said.
Heightened uncertainty over the tariff news and potential market reaction lifted the Cboe Volatility Index - an options-based measure of investor anxiety - to a more than two-week high of 24.80 on Monday. The index was up 0.2 point to 21.93 on Wednesday.
"I think the market is really holding its breath," said Mark Spindel, chief investment officer at Potomac River Capital LLC, who expects the so-called fear gauge to climb toward 30, a level associated with a high degree of risk aversion.
PLAYING DEFENSE
The tariffs announcement could also spur sharp moves in the dollar, euro and safe-haven gold.
U.S. manufacturing contracted in March after growing for two straight months, while a measure of inflation at the factory gate jumped to the highest level in nearly three years as anxiety rose over import tariffs, survey data out on Tuesday showed.
Recent tepid consumer spending numbers have raised the specter of lackluster economic growth and higher inflation. That could put the Fed, which paused its easing cycle in January to monitor the impact of tariffs, in an uncomfortable position.
For Anthony Saglimbene, chief market strategist at Ameriprise Financial, the risk is that Wednesday's announcement will offer no clarity on tariffs.
"The market to some extent has discounted the cumulative negative effect of tariffs on potential economic growth and corporate profitability," he said.
"The negative reaction in the market would be if the details of those tariffs still leave open a lot of questions about what it includes, who it includes."
Investors flummoxed by the wide range of possible outcomes from Wednesday's news would do well to not put all their eggs in one basket, analysts said.
"The bottom line is in the face of uncertainty that's flirting at levels that we haven't seen since the pandemic or the financial crisis, you need to be diversified," said Jack Ablin, chief investment officer at Cresset Capital.
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