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27.03.2025 10:21 AM
Who Had Any Doubts? Trump Remains Committed to His Economic Course (GBP/USD May Fall, #SPX May Rise)

Despite the ongoing political maneuvering, U.S. President Donald Trump remains committed to his economic strategy. This approach aims to dismantle the long-standing global economic model in which the U.S. primarily produces money while the rest of the world supplies the goods.

And once again—unsurprisingly—he has taken another step in this direction by following through on a previous promise: implementing a 25% tariff on all imported cars, including passenger and light trucks. Additionally, tariffs on spare parts were also increased. All of this is set to take effect on April 2, the so-called "Hour X," when other tariffs will also come into force. Why is he doing this? According to the president, the goal is to stimulate manufacturing within the U.S.

As I've previously explained, Trump's main objective is to quickly put the U.S. on the path of producing real goods—cars, computers, food, and so on—that are currently being imported in massive quantities. He understands that maintaining the previous economic course will eventually destroy the U.S. economically and politically. In effect, he's applying shock therapy, believing that while the initial effects may be painful, real improvements will follow. He aims to shift the trade balance in favor of the U.S. rather than China, the EU, Canada, Mexico, and others who currently benefit most from exporting to America.

And what about financial markets? They're showing signs of shock, but there hasn't been a collapse. On one hand, some still hope the president might soften his stance and reduce trade tariffs. On the other, realists believe that the first shock wave has passed. This means the markets have already priced in the decision and, in the future, will only react to the actual impact. Even imposition the most aggressive tariffs may not visibly affect the markets.

The U.S. stock market continues to benefit from an influx of foreign capital amid global geopolitical risks, including the Ukraine crisis. The weakness of the European economy, combined with hollow promises of recovery and discussions about creating a European army, remains just talk, prompting European businesses to gradually shift toward the U.S., where government support is clearly on display. We are witnessing a liquidity-channeling process from Europe to America.

Given all this, I believe there is no reason to expect a stock market collapse in the U.S. Yes, there may be a local dip around the April 2 tariff enactment, but any decline will likely be quickly bought up, setting the stage for a new wave of stock index growth.

Will the U.S. dollar fall sharply? I doubt it. Trump has repeatedly stated that he wants the dollar to retain its dominant global role. Any moderate decline in the dollar could be beneficial, helping U.S. companies remain competitive globally. I believe the ICE dollar index will stay above 103.00. However, the euro, sterling, and other Forex-traded currencies—except for the yen—may come under prolonged pressure from the ongoing trade wars.

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Forecast of the Day:

#SPX

The SPX CFD (S&P 500 futures) remains in a short-term uptrend and is even showing signs of a local bullish reversal. It is trading above the support level of 5711.85, which from a technical standpoint allows for continued growth. Holding above this level could lead the contract to rise toward 5812.75. A potential entry point could be 5727.87.

GBP/USD

The pair is trading below the 1.2930 level. If it stays below this mark, a renewed decline is likely, first toward 1.2865, and then to 1.2800. A potential entry point could be around 1.2908.

Pati Gani,
Analytical expert of InstaForex
© 2007-2025
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