Quarterly Outlook
Equity outlook: The high cost of global fragmentation for US portfolios
Charu Chanana
Chief Investment Strategist
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Tariff-related recession fears ignite widespread commodities selloff
Ole Hansen
Head of Commodity Strategy
US President Trump has imposed the steepest and harshest American tariffs in a century on all its major counterparts, sparking threats of retaliation and a broad selloff around the world on concerns that a global trade war on this scale and magnitude will drive an economic slowdown—not least in the US, where inflation forecasts have spiked, and sentiment among consumers and businesses has fallen sharply during the past couple of months.
There is a general understanding of why Trump wants to reshape the global economy, with his primary goal being the reversal of a two-decade trend of US companies moving production overseas to capitalise on cheaper labour costs, which, in turn, has boosted their stock prices but contributed to domestic job losses and economic stagnation in certain sectors and parts of the nation. This shift has had significant impacts on American manufacturing and the broader economy, as well as its ability to be self-sufficient in key materials.
Economic implications: short-term pain, long-term uncertainty
However, it is crucial to recognise that reversing such long-standing trends is a complex and time-consuming process. It cannot be achieved overnight—let alone in four years—and will inevitably involve trade-offs and temporary setbacks for both the US and its trading partners. What Trump delivered on this so-called "Liberation Day" was an economic war declaration likely to cause chaos across global supply chains, while in the short term raising the risk of an economic fallout, hurting demand for key commodities, with energy and industrial metals being the sectors most at risk. Financial markets responded strongly to the tariff announcement, with the USD, equity markets, and US Treasury yields all seeing sharp declines.
Energy and industrial metals among the hardest hit
Commodities suffered broad declines, with the Bloomberg Commodities Index trading down around 1.2% since Monday, with losses led by the growth- and demand-dependent sectors of energy and industrial metals. At this stage, however, the weakness has not triggered any major technical breakdown, potentially limiting selling pressures from momentum-focused traders. In addition, the USD trades sharply lower, and together with rising inflation expectations, the risk of a major correction seems limited at this stage.
Metals tariffs were largely left unchanged, with steel and aluminium at 25%, and no tariff yet on copper while the Section 232 investigation continues. Prices nevertheless fell, with growth risks weighing on prices—not least in China, the world’s top exporter and consumer of raw materials—as it faces tariffs of at least 54%, with the threat of another 25% on top for buying Venezuelan oil.
HG copper futures in New York briefly slumped to USD 4.825 before stabilising around USD 4.935, with the tariff-related premium over LME prices in London still elevated around 13%, highlighting a market where trades—as opposed to a deflated premium in gold and silver—still expect tariffs to be introduced. However, uncertainty about the level of tariffs will continue to create a great deal of volatility in the COMEX-LME spread.
Gold’s haven credentials on display despite deleveraging risks
Gold trades a tad softer on the day after briefly hitting a fresh record high overnight at USD 3,167—a move that was supported by geopolitical and economic tensions, as well as the weaker USD and rising inflation expectations driving down US real yields. However, while these supportive factors will continue to underpin bullion prices, a current rush to deleverage amid spiking volatility will also be felt in gold—not least given its recent record run of gains. What will determine the depth of a potential correction hinges on the investor base, and a battle between short-term, technical-focused traders and long-term accumulators from real money allocators, high-net-worth individuals, and central banks. Given how far gold has travelled in the past three months, a correction to USD 3,000—let alone USD 2,960—would not trigger any major alarm bells.
Silver slump as COMEX tariff premium evaporates
Silver and platinum, two semi-industrial metals, have both suffered sharp corrections once again as wrong-footed longs head for the exit. The weakness has been led by selling in the New York futures market after a fact sheet distributed by the White House stated that bullion (gold) and "other certain minerals that are not available in the United States" should not be subject to reciprocal tariffs. With silver and platinum imports accounting for the bulk of US consumption, traders concluded that these two metals would not be impacted, and with that, the tariff premium on futures prices in New York compared with spot prices in London has seen a sharp contraction. A 51% year-to-date increase in silver flows to COMEX-monitored vaults now faces the risk of a partial reversal, potentially adding supply to a market already weakened by short-term recession concerns.
Agricultural commodity slump led by cotton
Cotton futures fell 4.4% on the opening—the maximum daily move allowed by the exchange—following the announcement of US tariffs. The fibre is often used as a barometer of global growth because its demand is closely linked to the health of the global economy, with consumers often cutting back on clothing during an economic downturn. With losses seen across the grains and soybean sectors in anticipation of a reaction from China, a major buyer of both crops, adverse weather conditions in Brazil are once again supporting Arabica coffee, while cocoa has surged due to expectations of a smaller-than-expected mid-crop harvest in West Africa.
Recent commodity articles:
2 April 2025: Commodity Outlook: Commodities rally despite global uncertainty
31 Mch 2025: COT Report: Ongoing USD selling amid mixed week for commodities
26 Mch 2025: Commodities show strength in Q1, led by a select few
25 Mch 2025: Crude oil Sanctions threat counters tariff-driven demand worries
24 Mch 2025: COT on Forex and Commodities - 24 March 2025
21 Mch 2025: Commodities weekly: High-flying precious metal sees profit taking
19 Mch 2025: Has the gold express already left the station?
17 Mch 2025: COT Report: Silver and copper stands out in week of energy weakness
14 Mch 2025: Gold surges past USD 3,000 as haven demand grows
12 Mch 2025: Tariffs and the energy transition: Key drivers of copper demand
11 Mch 2025: Gold holds steady despite deleveraging risks in volatile markets
10 Mch 2025: COT Report: Wholesale reductions in speculators' USD and commodity longs
7 Mch 2025: Commodities Weekly: Tariffs, trade tensions, fiscal bazooka, and Ukraine
5 Mch 2025: Tariff threat disconnects HG copper from global market
4 Mch 2025: Stagflation and geopolitical tensions fuel renewed demand for gold
3 Mch 2025: COT Report: Broad retreat sees WTI longs slump to 15-year low
28 Feb 2025: Commodities weekly: Broad weakness as tariff fatigue sets in
24 Feb 2025: COT Report: traders turn selective despite ongoing broad rally
21 Feb 2025: Commodities weekly: energy market strength and Trump rethoric fuel surge
18 Feb 2025: COT report: crude, gold and grains see mild profit taking
5 Feb 2025: Broad Strength Drives Commodities sector to 26-month High
4 Feb 2025: Crude Oil Wipes Out 2025 Gains as Tariffs and Demand Weighs
3 Feb 2025: COT Report: Mixed Week Seen Ahead of Trump's Tariff Offensive
1 Feb 2025: YouTube: Joining Kevin Muir on The Market Huddle podcast
Podcasts that include commodities focus:
1 April 2025: Bracing for Liberation Day
25 Mch 2025: Did Trump just blink?
18 Mch 2025: US market found support, but how durable will it be?
14 Mch 2025: Is silver set to shoot the lights out?
10 Mch 2025: US un-exceptionalism is the theme
7 Mch 2025: US bear market risks ratchet higher. EUR train has left the station
4 March 2025: Are we on the verge of a big whoosh?
25 Feb 2025: Meltdown risks are rising. What to watch next
18 Feb 2025: Europe is on fire
5 Feb 2025: Mag 7 risks underappreciated?
3 Feb 2025: If new Trump tariffs stick, markets have only just begun to react
31 Jan 2025: Does the market think Trump is bluffing?
29 Jan 2025: The DeepSeek winners emerge
27 Jan 2025: DeepSeeking missile strikes global markets
24 Jan 2025: Four days in, Trump continues to dominate headlines, but ...
20 Jan 2025: Trump 2.0 swings into action
17 Jan 2025: Brace for Monday, as a new era begins
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