Tariffs, trade war, unstable markets. What is happening?

In recent days, financial markets have shown signs of uncertainty due to new trade and political tensions. The United States has introduced tariffs of 25 percent on Canada and Mexico, as well as doubling tariffs on Chinese products to 20 percent. In addition, President Donald Trump announced new reciprocal tariffs starting April 2, which will also affect European agricultural products. These developments have increased investors' concern, making them more cautious about taking risks.

The geopolitical situation also remains in the spotlight: the United States has suspended military aid to Ukraine, while in Europe, Commission President Ursula von der Leyen has unveiled a plan to strengthen defense, estimating spending of about 800 billion euros. Meanwhile, the European Central Bank (ECB) is preparing for a possible interest rate cut at its meeting on Thursday.

Faced with this scenario, European stock markets suffered declines. The Italian FTSE MIB index lost 2.83 percent, returning to December 2007 levels. In the U.S., several stocks also fell: General Motors (-2.44%) and Ford (-3.30%) suffered from trade tensions, while Tesla (-8.37%) was affected by the fact that a significant portion (about 15%) of the components of its Model Y came from Mexico and Canada. The technology sector suffered heavy selling, with Nvidia down 7.63%. Bucking the trend, Walgreens Boots Alliance rose 4.35% on rumors of a $10 billion acquisition.

In the Italian stock market, Leonardo closed lower (-1.67%), despite rumors of possible government support for the acquisition of Iveco Group's military business (-5.79%). The banking sector saw significant declines, with Unicredit (-4.26%), Banco BPM (-3.54%) and Bper Banca (-4.21%). Stellantis lost 8.50% due to duties and declining registrations in Italy, France and Spain.

In the commodities market, gold is back above $2,900, with investors seeking safe-haven assets to protect themselves from economic uncertainty. Oil, on the other hand, is down after OPEC announced a production increase in April.

On the currency front, the euro remained stable against the dollar (1.054), while Bitcoin fell sharply, dropping below $80,000 after last week's sharp rise related to Trump's announcement on the creation of a national strategic cryptocurrency reserve.

Looking at the stock market, corporate earnings remain solid. Companies in the S&P 500 are reporting 5.50 percent growth in sales and 13.50 percent growth in profits over 2023. But politics is beginning to affect companies; the number of companies reporting a worsening outlook rather than an improvement is high. This level of pessimism has not been seen in eight years, not even during the 2020 pandemic.

Although markets are fluctuating without much change, some wonder whether this stability is a prelude to a more pronounced correction or whether it may represent a new normal. In any case, the recommended strategy remains to maintain diversified portfolios and to carefully evaluate any profit-taking, especially to free up resources to be exploited in potential future moments of weakness.