Core Viewpoint - The article discusses the implications of Trump's recent "reciprocal tariff" executive order, which imposes a 10% minimum tariff on global trade partners and a 34% tariff specifically on China, highlighting the potential economic risks and market reactions associated with this policy [1][2][3]. Group 1: Objectives of the Tariff Policy - The primary goal of the tariff policy is to alleviate the U.S. debt burden by increasing revenue through higher tariffs [5]. - Another objective is to stimulate the return of manufacturing jobs to the U.S. by making domestic production more financially attractive [6]. - The policy aims to reshape the geopolitical landscape and re-establish U.S. dominance in international trade [7]. Group 2: Market Reactions - Following the announcement, U.S. stock markets experienced significant declines, with the Dow Jones dropping 2.72%, S&P 500 down 3.16%, and Nasdaq falling 4.24% within two days [12]. - Global markets also reacted negatively, with Japan's Nikkei 225 index down 2.6% and Vietnam's stock market plummeting 7% [13]. - The volatility in the markets reflects concerns over the uncertainty of the tariff policy and its long-term implications [14]. Group 3: Investment Strategies - In the U.S. market, a cautious approach is recommended, avoiding high-valuation tech stocks and focusing on defensive sectors such as utilities and healthcare [24]. - For Hong Kong stocks, it is advised to reduce exposure to export-oriented companies and increase holdings in domestic consumption and financial sectors [34]. - In the A-share market, investors are encouraged to consider undervalued blue-chip stocks and sectors benefiting from domestic demand and technological advancements [34]. Group 4: China's Response and Market Risks - China is likely to implement reciprocal tariffs on U.S. goods, particularly in agriculture and energy, while also diversifying its export markets [37]. - Long-term strategies may include tax reductions and infrastructure investments to boost domestic demand, alongside enhancing regional trade cooperation [38]. - Potential risks include increased import costs leading to domestic inflation and the impact of reduced U.S. demand on export-oriented companies [38].

1. Report Industry Investment Rating No relevant content provided. 2. Core Viewpoints of the Report - The US announced more details of the reciprocal tariff policy on April 3, with the overall intensity exceeding market expectations, and the concept of "reciprocal tariff" differing from the previous market understanding [4]. - The calculation parameter of the "reciprocal tariff" is anchored to the "trade deficit" rather than the "tariff" of the trading partner, which may make it difficult for countries to negotiate with the US [8][11]. - The weighted average tariff rate of the US on China has sharply increased to 71.3%, and it is estimated that China's exports to the US will decrease by 45.6%, total exports will decrease by 12.3%, and real GDP will decline by 1.8% [15]. - In the second quarter, the main macro - and large - asset allocation logic has shifted to stagflation [16]. - The US economic growth forecast for 2025 is adjusted downward to 1.9%, and inflation growth is continuously raised to 3.0%, with a significant divergence between "subjective and objective" and "short - and long - term" inflation [19]. 3. Summary According to Relevant Catalogs 3.1 Trump's Reciprocal Tariff Details and Time - line - Trump plans to set a 10% "minimum benchmark tariff" on global trading partners on April 5, and impose "reciprocal tariffs" on 60 countries with large trade deficits on April 9. The US average external tariff level will increase from 2.3% at the end of 2024 to 23%, theoretically dragging down GDP growth by 2.4% and increasing the inflation level by 1.7% [6]. - Many countries have introduced counter - tariff measures, such as the EU imposing tariffs on 26 billion euros of goods (including 8 billion euros of steel and aluminum), Canada imposing tariffs on various products worth billions of Canadian dollars, and China imposing tariffs on coal, liquefied natural gas, etc. [3]. 3.2 "Reciprocal" Concept - The market expected the "reciprocal tariff" to be based on the average tariff level of each country on the US, plus non - tariff trade barriers. However, the official calculation formula is based on the trade deficit, which may make it difficult for countries to negotiate with the US [11]. 3.3 US Tariffs on China - The weighted average tariff rate of the US on China has reached 71.3%, exceeding the previously announced 60%. It is estimated that China's exports to the US will decrease by 45.6%, total exports will decrease by 12.3%, and real GDP will decline by 1.8% [15]. 3.4 Market Impact - **Macro and Asset Allocation Logic**: The main logic in the second quarter has shifted to stagflation. Different quarters from 2024 to 2025 have different macro themes and asset allocation strategies [16][17]. - **Economic Data**: The "hard data" of the US economy has shown signs of stabilization and rebound, but the "soft data" is still weak. Key economic data in early April, such as non - farm payrolls, CPI, PPI, etc., are highly concerned [32]. - **Market Reaction** - **Commodity Market**: Gold prices are strong, the Bloomberg Commodity Index has declined, and the gold - silver ratio has risen significantly, in line with stagflation characteristics [33]. - **Equity Market**: Global equities are under pressure, especially in the US. The "stagflation" trading is evident in the US stock market [35][37]. - **Bond Market**: The yield of 10 - year US Treasury bonds has declined rapidly, and the yield curve has flattened. The target yield of 10 - year US Treasury bonds is further lowered [39][47]. - **Exchange - Rate Market**: The US dollar has lost its safe - haven status, and the US dollar index has fallen significantly. The target level of the US dollar is further lowered [40][42].

Investment Strategy - The report highlights that the recent implementation of "reciprocal tariffs" by the U.S. is expected to increase global trade costs, leading to potential inflationary or recessionary pressures on the global economy [1][8] - The tariffs include a 10% minimum baseline tariff and higher tariffs on specific countries, with China facing a 34% tariff, which could exacerbate external demand challenges for China [7][8] Short-term and Mid-term Market Impact - In the short term, risk appetite is likely to be under pressure due to inflation or recession narratives, impacting asset pricing and increasing demand for safe-haven assets [3][10] - Historical data suggests that after tariff announcements, the A-share market may experience initial pressure followed by potential rebounds, depending on new catalysts [10] - Mid-term asset pricing will revert to fundamentals, with the actual impact of tariffs and retaliatory measures from other countries being crucial [10] Policy Response and Domestic Growth - The report emphasizes the need to monitor the actual impact of tariffs and potential policy responses, as external demand contraction may necessitate stronger domestic growth policies [2][9] - There is an expectation for increased domestic policy measures to stimulate growth, such as interest rate cuts and consumption incentives, especially if negotiations yield positive outcomes before the tariffs take effect [2][9] Asset Allocation Recommendations - The report suggests a defensive approach focusing on dividend-paying assets, as market risk appetite is expected to decline [4][11] - Key sectors to consider include telecommunications, transportation, utilities, and state-owned banks, which are likely to attract defensive capital [11] - Additionally, there is a recommendation to explore offensive opportunities in sectors that may benefit from tariff exemptions or domestic growth policies, such as local consumption and infrastructure investments [12]

Core Viewpoint - The new round of tariffs announced by Trump has led to a significant decline in global stock markets, with Vietnam and Japan experiencing the largest drops, while gold prices reached new highs [1][2]. Tariff Details - The new tariff policy consists of a baseline tariff increase of 10% effective from April 5, which is lower than market expectations. The retaliatory tariffs, effective from April 9, are significantly higher than anticipated, with China facing a 34% tariff (totaling 54%), the EU 20%, Japan 24%, Vietnam 46%, India 26%, and South Korea 25% [3][6]. Market Reactions - Following the announcement, stock markets globally fell, with Vietnam's market plummeting by 7% and Japan's by 3%. The A-share and H-share markets also continued to adjust, with the Shanghai Composite Index down 0.24% and the Hang Seng Index down 1.52%. The Chinese yuan depreciated to 7.35 against the US dollar [3][6]. Reasons for Tariff Increases - The Trump administration's rationale for increasing tariffs includes addressing trade imbalances, national security concerns, domestic political factors, and economic benefits. The administration believes that unfair trade practices by China contribute to the trade deficit and that tariffs can protect U.S. industries and generate government revenue [6][7]. Economic Implications - The tariffs pose a risk of "stagflation" for the U.S. economy, as consumers may face higher costs leading to reduced demand and increased economic pressure. The tariffs are expected to raise price levels and create upward pressure on inflation in the short term. Consumer inflation expectations have surged, with a significant increase noted in March [9]. The Federal Reserve may find it challenging to lower interest rates in the short term due to these economic pressures [9].

Group 1 - Concerns over tariffs have altered long-term expectations for the US stock market, leading to the conclusion that the bull market that began in October 2022 has ended [1] - The impact of tariff policies is significant, as the current administration prioritizes reducing fiscal deficits over economic growth, inflation, and stock market performance [1] - The risk of stagflation may increase if oil prices rise sharply in the second quarter, with stagflation characterized by uncontrollable inflation beyond 3.0% [1] Group 2 - Domestic economic indicators are gradually improving, with social financing data showing year-on-year increases and PPI showing notable improvements [2] - The A-share market is expected to shift from sentiment-driven to performance-driven in the second quarter, favoring sectors with low valuations and strong earnings [2] Group 3 - The Hong Kong stock market is expected to face limited impact from US tariff policies, with a shift from broad-based gains to sector differentiation anticipated [3] - Key sectors to watch include: 1. Cloud computing, which is expected to benefit directly from deployments in various enterprises [3] 2. New energy vehicles and components, which have shown rapid growth and competitive advantages [3] 3. New consumption and pharmaceuticals, with the latter undergoing valuation recovery after three years of decline [3] 4. Dividend sectors, including insurance and stable earnings from operators, banks, and public utilities [3] 5. A performance revision pool in Hong Kong stocks, with approximately 51% of companies showing upward revisions in earnings [3]

Core Insights - The implementation of "reciprocal tariffs" is significantly stronger than market expectations, with a baseline tariff of 10% and additional tariffs based on the perceived tariff levels of trading partners, leading to potential increases in average import tariffs in the U.S. by approximately 17 percentage points to around 22% [2][4] - The tariffs are particularly high for countries with significant trade surpluses with the U.S., such as China (34%), Vietnam (46%), and Japan (24%), indicating a strategic aim to reduce trade deficits and promote domestic manufacturing [3][4] - The unexpected introduction of these tariffs may serve as a starting point for new trade negotiations, with a more lenient approach towards Canada and Mexico, suggesting that countries willing to negotiate may avoid the highest tariffs [3] Industry Implications - The new tariff measures are likely to accelerate the risk of "stagflation" in the U.S., with inflationary pressures and economic growth risks expected to be more pronounced than during previous trade disputes [4] - The broader scope and magnitude of the tariffs could lead to retaliatory measures from trade partners, further exacerbating negative economic impacts on the U.S. economy [4] - The U.S. stock market is anticipated to enter a comprehensive downward trend, influenced by the global trade disruptions and the potential for an economic recession [4]

Group 1: Tariff Policy - The U.S. has implemented a 10% "minimum baseline tariff" on trade partners, with higher tariffs on specific countries, effective April 5 and April 9 [1] - The "reciprocal tariffs" include 34% on China, 20% on the EU, and varying rates on other countries such as 46% on Vietnam and 49% on Cambodia [1] - Certain goods, including steel, aluminum, and specific minerals, are exempt from these tariffs [1] Group 2: Market Reaction - Following the announcement of the tariffs, U.S. stock futures dropped significantly, with Nasdaq futures down over 4% and S&P 500 futures down over 3% [2] - The S&P 500 index has seen a cumulative decline of approximately 6.4% in the first 50 trading days of Trump's second term, marking one of the worst performances since 1950 [2] - Asian markets also reacted negatively, with Japan's Nikkei 225 index dropping 1.91% at the open [2] Group 3: Economic Impact - The Atlanta Fed's GDPNow model has revised the U.S. GDP forecast for Q1 2025 down to -3.7%, indicating a worsening economic outlook [3] - The American Retail Federation warns that tariffs will be passed on to consumers, negatively impacting millions of U.S. businesses [3] - Piper Sandler predicts that tariffs will increase U.S. inflation by 2.6 percentage points and lead to a 1% annualized contraction in the economy over the next three months [3] Group 4: International Response - International criticism of U.S. protectionism is growing, with various countries expressing opposition to the tariff policies [4] - Chinese Foreign Minister Wang Yi emphasized that the U.S. should address its own issues rather than blaming others, warning that such actions could disrupt global markets [5] - Canadian Prime Minister Mark Carney and EU Commission President Ursula von der Leyen indicated that their governments are preparing countermeasures against U.S. tariffs [5]

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Market Overview - The U.S. stock market opened lower on Monday, with all three major indices declining, particularly the technology sector, where the Nasdaq index fell approximately 2% and Tesla dropped nearly 6% [1][4] - European and Asian markets also experienced significant declines following the U.S. market trend [4] Economic Concerns - The S&P 500 index has been under pressure since reaching a historical high in mid-February, down about 9% from its peak on February 19, while the Nasdaq has dropped approximately 14% since its highest close on December 16 of the previous year [6][7] - The upcoming announcement of "reciprocal tariffs" by President Trump on April 2 is expected to have a substantial impact on the market, with analysts warning of potential negative outcomes [7][11] Consumer Sentiment and Inflation - Consumer confidence in the U.S. has reached its lowest level in over two years, with the University of Michigan's consumer sentiment index revised down to 57 from 57.9 [8] - Long-term inflation expectations have risen to the highest level in 32 years, with the one-year inflation expectation increasing from 4.9% to 5% and the long-term expectation rising to 4.1% [8][9] Inflation Data - The PCE price index for February showed a month-over-month increase of 0.3% and a year-over-year increase of 2.5%, aligning with expectations [9] - The core PCE price index, excluding food and energy, rose 0.4% month-over-month, marking the highest level since January 2024, with a year-over-year increase from 2.7% to 2.8% [9][10] Market Sentiment - Wall Street is currently experiencing heightened anxiety due to the uncertainty surrounding Trump's tariff policies, with many investors adopting a "sell on rallies" mentality [11][12] - There are concerns that the S&P 500 index could drop to 5000 points if economic conditions worsen, with predictions of a potential recession looming [12][13] Investment Outlook - Some analysts suggest that emerging markets may become more attractive as investors shift focus away from U.S. assets due to the prevailing economic uncertainties [13] - Conversely, there are optimistic views from certain institutions predicting a rebound in U.S. stocks, with expectations of a 10%-15% increase this spring [13]

Asset Allocation Recommendations - The recommendation for major asset classes indicates a preference for high allocation in USD bonds and high dividend stocks, while suggesting a neutral allocation for A-shares and gold [1] - The outlook for the USD is a strong oscillation, while the Euro, RMB, and JPY are expected to show weak oscillation [1] Investment Strategy Recommendations - Cash and pure debt products are recommended for standard allocation, with a focus on increasing positions in long-term pure debt products when the 10-year government bond yield exceeds 2.0% [2] - For fixed income, a balanced approach is suggested, including strategies like quantitative neutral and multi-asset strategies [2] - A balanced allocation of growth, dividend, and consumer funds is recommended for equity investments, with a focus on technology as a long-term theme [2] Economic Overview - The U.S. economy is facing "stagflation" concerns, with a mixed outlook where consumer spending is weak but investment is recovering [5][6] - The European economy is showing signs of recovery, with fiscal policies supporting growth and a potential pause in interest rate cuts by the ECB [20] U.S. Economic Insights - The U.S. economy's growth forecast is negative at -1.8% due to trade deficits, but excluding trade, the outlook improves significantly [6] - Inflation concerns persist, with the CPI dropping to 2.8% and core CPI at 3.1%, indicating a potential for future rate adjustments by the Fed [11][16] European Economic Insights - Germany and the EU are increasing defense spending, which may enhance economic growth prospects, leading to a potential slowdown in rate cuts by the ECB [20] - The ECB has noted improvements in loan growth, reducing the necessity for continuous rate cuts [20] Japanese Economic Insights - Japan's wage growth is at a 33-year high, indicating a strengthening "wage-price" cycle, which may open up room for future interest rate hikes [25] - The Bank of Japan maintains a cautious stance, with market expectations for rate hikes increasing in the second half of the year [25] Commodity Market Insights - Gold is showing signs of overheating, with valuations nearing historical highs, suggesting caution for investors [50][55] - Oil prices are expected to stabilize, with Brent crude potentially rising above $85 per barrel due to supply constraints and macroeconomic stability [56] Chinese Economic Insights - China's economy is showing signs of recovery, with domestic demand improving and industrial production growth outpacing expectations [59][63] - The fiscal policy is becoming more proactive, with significant increases in government bond issuance to support economic growth [73][74]