As global markets brace for Trump's upcoming tariff announcements on April 2, uncertainty prevails due to mixed signals about their scope and implementation. Consumer confidence has hit a four-year low amid inflation fears, while the labor market shows early signs of pressure. Meanwhile, gold prices remain elevated despite recent pullbacks, supported by ongoing geopolitical tensions.

Trump's Mixed Trade Signals Keep Markets on Edge as Confidence Weaken

As the U.S.'s so-called "Liberation Day" approaches, President Donald Trump's remarks on Monday suggesting that the upcoming tariffs could be more targeted and may include certain exemptions had somewhat eased concerns. However, his back-and-forth statements continue to create confusion.

Previously, Trump had said that reciprocal tariffs would be calibrated to match the trade restrictions imposed on the U.S. by other countries. Yet his recent comments implied that full retaliation might not apply to all countries, and that exemptions or reductions could be offered.

While on Monday Trump suggested many countries might be exempted, by Tuesday he was signaling an intention to limit such exemptions. In an interview on Tuesday, he said that some exemptions were being discussed, but he did not want to grant too many.

Uncertainty remains over which countries and at what rates the April 2 tariffs will be applied. If the tariffs turn out to be relatively limited in scope, markets may see a meaningful relief rally. On the other hand, if they are implemented aggressively and strain relations with key trade partners, fears of a broader trade war could reemerge. Indeed, several trade partners have already responded—or pledged to respond—with retaliatory measures to earlier tariff actions.

Meanwhile, Trump said that while some sector-specific tariffs are being delayed, others could be announced in the very near term. Tariffs on the automotive and pharmaceutical industries may be revealed within days or weeks, while those on lumber and semiconductors are expected to be implemented at a later stage.

In addition, people familiar with the matter said tariffs on copper imports could go into effect within the next few weeks. In February, Trump instructed the Department of Commerce to open an investigation into copper tariffs and deliver a report within 270 days.

Similar investigations during Trump's first term took roughly 10 months to complete. However, given Trump's repeated public remarks about imposing copper tariffs—and the claims that they could be introduced sooner—there is growing skepticism that the investigation is merely a formality.

As a result, expectations that the April 2 tariffs may be less aggressive have led to partial relief in markets. Derivatives investors have trimmed their bets that the Federal Reserve will cut rates this year to counter recession risks. Nevertheless, Trump's continued threats of other non-reciprocal tariffs and broader policy actions are keeping concerns elevated and weighing on consumer sentiment.

The Conference Board's gauge of consumer confidence fell to a four-year low in March amid worries over the economic outlook and expectations of higher prices stemming from tariffs.

The index for current conditions declined more modestly, but the expectations index—measuring the six-month outlook—dropped to its lowest level in 12 years.

Consumer optimism about future income, which had been relatively strong in recent months, faded significantly. The survey also highlighted growing anxiety spreading into the labor market.

A separate study released Tuesday revealed that job searches by federal employees have risen sharply. According to research from the Indeed Hiring Lab, job applications among employees at selected federal agencies—chosen for review by the Department of Government Efficiency—have increased by more than 50%.

While official data still point to a resilient labor market, there has been a general slowdown in hiring. In such an environment, rising job search activity among federal employees could add pressure to the labor market. Next week's official payrolls report is expected to offer updated insights into current labor conditions.

Additionally, the Conference Board's survey showed consumers are concerned about rising inflation, while businesses warned of higher prices and weaker demand. These signals align with growing market fears of a possible recession or even stagflation. The share of respondents expecting a recession rose to a nine-month high.

Consumer and business surveys continue to show inflation expectations at their highest levels in years. However, Fed Chair Jerome Powell last week stated that inflation expectations remain "well-anchored" overall, downplaying the recent survey data as outliers.

Some Fed officials, however, appear more concerned than Powell about both inflation and inflation expectations. Speaking at an event on Tuesday, Fed Governor Adriana Kugler pointed to upward movements in some inflation expectation indicators and argued that rates should be held steady for longer.

As Duhani Capital Research team, we believe that the key questions for the period ahead will revolve around how tariffs and inflation expectations shape price dynamics, and to what extent weakening sentiment weighs on consumer spending and labor market momentum. For now, Fed officials are likely to remain on hold until they gain more clarity, and they will probably seek answers to these questions before taking further action.

Friday's upcoming report will provide a snapshot of the Fed's preferred inflation gauge and consumer spending, offering additional insight. However, since the data covers February, any price pressures may reflect only a limited impact from tariffs, and spending figures could be distorted by front-loaded demand ahead of tariff implementation.

Tariff Optimism Pressures Gold, Yet Safe-Haven Demand Remains Resilient

Growing expectations that President Trump's upcoming reciprocal tariffs, set to be announced next week, will be more targeted have triggered a pullback in gold prices. However, ongoing risks continue to support safe-haven demand, keeping gold fluctuating near record highs.

Although fading rate-cut bets and a slightly stronger U.S. dollar have weighed on gold demand over the recent sessions, concerns about the U.S. economic outlook and persistent uncertainty remain elevated, helping to limit downside pressure.

Meanwhile, ongoing geopolitical tensions are providing additional support for safe-haven assets. On Tuesday, President Trump suggested that Russian President Vladimir Putin may be reluctant to finalize a ceasefire deal related to the Russia--Ukraine war.

Russia has reportedly demanded the lifting of sanctions as a condition for fulfilling part of a temporary ceasefire agreement discussed in recent weeks. However, its terms for a permanent deal appear difficult for Ukraine to accept.

This indicates that tensions in the region are unlikely to be resolved easily and may continue. This could keep geopolitical risks elevated and continue to support gold demand.