AMC Weekly

Welcome to the new issue of the Bocconi Student Asset Management Club newsletter!

Global Economy

U.S.

On April 2, 2025, (a date President Trump proclaimed “Liberation Day”) the administration announced the most sweeping tariff hike since the Smooth-Hawley Act, a 1930 law known for triggering global trade law and deepening the Great Depression. 

Taking effect on April 5th, a universal 10% tariff will be applied on all imported goods, with higher, country-specific rates set to begin on April 9. Imports from China, for example, will face an effective tariff rate of 54%.  Canada and Mexico seem to be largely exempted from this round of tariffs and the previous ones (steel, aluminium, automotive) together with the expected ones (semiconductors, copper, and lumber) will be assessed separately and not stacked. 

Since tariffs increase import prices, American households may incur additional costs of up to $3,800. The announcement moreover led to a substantial stock market downturn with major indices experiencing their most significant declines since 2020. The Financial Times referred to Trump’s decisions on the 2nd of April as “an astonishing act of self-harm”. 

Mark Zandi, chief economist at Moody's Analytic estimated that an U.S. recession would likely reduce GDP by 2% and boost unemployment next year to 7.5%, up from its current rate of 4.1%.

EMEA

As Trump’s tariffs take a heavy toll on car manufacturing and metals, Europe is about to enter a period of high trade anxiety. Germany is particularly facing headwinds as it is heavily dependent on exports to America. 

The European Central Bank is delicately trying to balance the risk of inflation, slow growth, and an eventually receding economy. The EU is overall quite vulnerable to trade operations with America given its weak industrial base. Supply chains are also at risk, implying that France and Italy will ultimately bear the cost of tariffs, even if they are less exposed initially. 

The ECB is considering transatlantic trade friction and is discussing possible countermeasures with WTO partners. However internal disagreements between Germany and France could delay or even heavily cut back efficient measures to tackle the incoming trade war.  It is important to state that Eastern European nations, which are less dependent on transatlantic relations, may only see marginal effects of the imposed tariffs. 

Canada

In response to the increasing pressure from U.S. tariffs, Canada seems on the way to respond with new sets of countermeasures.  

On April 3, 2025, Canadian Prime Minister Mark Carney announced new 25% tariffs on American automobiles as a direct response to the U.S. administration’s imposition of tariffs on Canadian steel aluminum and vehicles. This newly announced measure adds to the first phase of retaliatory counter-tariffs started earlier this year on March 13, 2025, when Canada already imposed 29% tariffs on $29.8 billion worth of U.S. goods. 

Economists warn that these trade tensions could shave 2.5% off Canada’s GDP by early 2026 with inflation potentially reaching 7.2% by mid-2025. The unemployment rate is expected to rise, possibly touching 7.9% by the end of the year in industrial sectors. 

APAC

After “Liberation Day”, the APAC region is back in the global spotlight since the imposed tariffs further worsen the relationship between certain Asian nations and the USA. China is hereby the central focus, as the now proposed duties target key strategic sectors such as EV, batteries and semiconductors. The situation adds further pressure to the already slow Chinese market recovery, which is trying to stimulate domestic demand to tackle slowing down demand from abroad. 

Nations in Southeast Asia are among the most affected by the imposed tariffs. Vietnam and Malaysia are heavily dependent on the USA, as America is the largest export market for Vietnam. Vietnam traditionally exported many low-cost manufactured goods to the United States. This might lead many multinationals to further relocate supply chains away from the nations they once moved them to. It is President Trump’s declared goal to move manufacturing back to the United States. Hanoi is engaging in silent diplomacy with the United States as it seeks flexibility for at least the semiconductor market, but the result is uncertain. 

In the meantime, India is emerging as a key winner, as its heavily domestic market and its strong political alignment with the West attract major FDI. Japan and the Republic of Korea are facing a complicated situation as they need to balance diplomatic ties with the US and deep trade ties with China. Overall APAC needs to renew its strategies to counter a shifting global economic situation.

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Equity Highlights

U.S. & Europe

This week both the U.S. and European markets experienced steep declines, driven by renewed fears of a global trade war following aggressive new tariffs announced by President Trump. 

In the U.S., the S&P 500 fell 8.21%, the Nasdaq dropped over 8% and the Dow Jones lost over 2,200 points in just two days, erasing nearly $6.6 trillion in market value. The trigger was Trump’s unexpected move to impose a 10% tariff on all imports, alongside targeted duties aimed at specific countries. China retaliated with a 34% tariff on U.S. goods, sparking fears of a prolonged trade conflict. Major tech and industrial stocks were hit hardest, and recession worries intensified with some analysts, including JPMorgan, raising the odds of a U.S. recession to 60%. 

European markets followed suit. The STOXX 600 dropped 1.5%, while Germany’s DAX slid 1.8%, led by declines in autos, banking, and luxury goods. Export-heavy firms like Volkswagen were under pressure, especially amid speculation that car exports would be directly affected by U.S. tariffs. 

Investors fled to safe havens, sending Treasury yields and oil prices lower, while market volatility surged. The week ended with growing uncertainty, as markets braced for further fallout from escalating global trade tensions. 

APAC

In Japan, the Nikkei 225 index opened on Monday, March 31 at 36,440.18 points. It dropped by 2.25% that day, and by Friday, it had fallen to 33,780.58, losing 7.29% for the week. This is the biggest weekly drop in five years. The banking sector has been the hardest hit, as fears of tariffs and their impact on economic growth have fuelled speculation that the Bank of Japan (BOJ) may be forced to postpone interest rate cuts. Shares of Mitsubishi UFJ Financial Group, one of Japan's leading banks, plunged 11.6%, their worst daily performance since Aug. 5. 

In China, the yuan currency fell to its lowest level in seven weeks. Stocks also went down after Trump announced a total of 54% tariffs on Chinese goods. The CSI 300 index closed down 0.6%, hitting its lowest in two months. Hong Kong's Hang Seng index lost 1.5% on Friday. The most affected sectors were technology, particularly companies related to artificial intelligence and semiconductors. 

Although tech stocks had led the rally in previous weeks, the announcement of new tariffs triggered profit-taking and fears of future restrictions. 

In India, the BSE Sensex index fell 2.99%, closing at 75,364.69 points. This decline was mainly influenced by the 26% tariffs on Indian imports. While this percentage is lower than the tariffs applied to other Asian countries, it has nevertheless raised concerns about a possible escalation of global trade tensions. The sectors most affected were information technology and commodities, due to their significant exposure to the US economy and global growth. IT companies are concerned that a possible recession in the United States could negatively affect their revenues. 

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Fixed Income Focus

U.S. Treasuries

This week, the benchmark ten-year yield dropped 26 basis points to 4.01%, while the two-year yield dropped 21 basis points to 3.68%. The decline reflects building concern over the economic impact of President Trump’s unexpectedly steep new tariffs and pressure for rate cuts. Fed Chair Jerome Powell, however, acknowledged that, regarding lowering interest rates, it is still “too soon to say what will be the appropriate path for monetary policy”. Overall, US fixed-income markets are responding accordingly considering growing recession fears and expectations of Fed easing. 

Relative to last week, treasury yields, specifically mid-term to long-term, decreased significantly. The curve shows no upward movement across maturities. 

It is safe to say that investors are pricing in weaker economic growth, even as inflation risks remain elevated. Some news sources have called their behavior a “flight to safety” as investors flee from risky assets in favor of more secure government debt. 

Europe

This week, European fixed income markets were driven by escalating trade tensions.

Market Reaction: 

• German Bunds: Yields on 10-year Bunds declined as investors sought safe assets. The flight-to-quality trade pushed Bund prices higher, reaffirming their role as a safe haven during global uncertainty. 

• Italian BTPs: Italian sovereign debt underperformed. The 10Y BTP/Bund spread widened to 120 basis points—its highest since January—driven by persistent concerns over Italy’s fiscal stance and the market's selective demand for credit quality. 

• Peripheral Europe: Other southern European bonds followed a similar pattern, with spreads widening across the board, reflecting broader investor caution toward credit risk. 

• Volatility Index (VIX): Jumped to 30.02, its highest level in eight months, as equity markets sold off and global investors repositioned portfolios away from risk. 

Looking Ahead: 

Investors are now watching closely for signals from the European Central Bank, which may come under pressure to maintain or expand accommodative policies. If trade tensions persist, demand for high-quality sovereigns may continue to grow, while spreads on peripheral bonds could remain elevated. 

The fixed income landscape is increasingly shaped by geopolitics. Maintaining diversification and monitoring duration and credit exposures are key as the macro picture evolves. 

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Wrap up for the AM Division

U.S. President Donald Trump’s sweeping tariffs continue escalating global tensions and harming domestic GDP, unemployment, and inflation. Europe and Canada are struggling to respond effectively but are considering retaliatory tariffs, rate cuts, and policy shifts. In APAC the impact is more uneven since China is more impacted, but some Southeast Asian countries benefit from supply chain realignments. However, India has emerged as a key target for foreign direct investment. Amidst this growing geopolitical uncertainty, equity markets are plunging across the U.S. and Asia with technology, automotive, and industrial sectors taking the largest hit. Overall, investors are pulling out of risky assets and moving toward safer government debt, reflecting heightened fears of a global recession. 

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Credits

Pablo Ruiz (Team Leader)  

Mahek Dodani (Team Leader)  

Luca Busetti (Global Economy Analyst)  

Lorenzo Pignataro (Global Economy Analyst)  

Angelo Elpidio De Matteo (Equity Analyst)  

Qasim Sultan (Equity Analyst)  

Stella Bellini (Fixed Income Analyst)  

Vladimir Pashov (Fixed Income Analyst) 

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References

• Guardian News and Media. (2025, April 5). Trump’s “Liberation Day” could mean recession in the US and Pain Worldwide | Steven Greenhouse. The Guardian.

• Harithas, B., Meng, K., Brown, E., & Mouradian, C. (n.d.). “liberation day” tariffs explained. CSIS.

• board, T. editorial. (2025, April 3). America’s astonishing act of self-harm.

• Press, T. C. (2025, April 4). Economy posts biggest job loss since 2022 as U.S. tariffs begin to take their toll.

• How Canadian businesses and households are reacting to the trade conflict. Bank of Canada. (n.d.).

• Canada hits US Auto Sector with tariffs, mirroring Trump’s move. (n.d.-b).

• Guardian News and Media. (2025a, April 5). “fundamentally wrong, brutal and paranoid”: How will the world respond to Donald Trump’s tariffs? The Guardian.

• Mann, T. (2025, April 5). China matches trump tariffs, restricts rare earth exports. China matches Trump tariffs, restricts rare earth exports.

Marx, W. (2025, April 3). Trump tariffs spark ire and dismay from international leaders. NPR.