According to the Zhitong Finance APP, Kaiyuan Securities released a research report stating that on April 3 local time, Trump announced &#34;reciprocal tariffs,&#34; which exceeded market expectations. The reciprocal tariffs combine &#34;carpet-style&#34; tariffs with &#34;one country, one tax rate,&#34; covering more than 60 major economies. The firm believes that reciprocal tariffs may increase uncertainty and market concerns, exacerbating the risk of &#34;stagflation&#34; in the U.S. Calculations show that tariffs could raise U.S. PCE inflation by 1.9 percentage points and reduce real GDP growth by 1.3 percentage points, although it may also bring in over $700 billion in fiscal revenue. In the face of &#34;stagflation&#34; risks, the Federal Reserve can only choose to wait and see, making it difficult to cut interest rates in the short term. This will further increase the risk of economic downturn and add downward pressure on the market.
<h2>The main points of Kaiyuan Securities are as follows:</h2>
1. Imposing an additional 10% basic tariff, with higher tariffs on countries/regions with significant trade deficits
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Trump will impose an additional 10% basic tariff, effective April 5. Trump believes that foreign trade and economic practices have created a national emergency, so he invoked the International Emergency Economic Powers Act (IEEPA) to impose an additional 10% tariff on all countries.
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Higher additional personalized tariffs will be imposed on countries/regions with significant trade deficits with the U.S., effective April 9. Trump also announced that countries/regions with significant trade deficits with the U.S. will be subject to higher additional personalized tariffs (excluding the 10% basic tariff). The European Union will be charged a 20% tariff, mainland China a 34% tariff, and Vietnam, Japan, and India will have tariff rates of 46%, 24%, and 26%, respectively.
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A comprehensive 25% import tariff on automobiles will be imposed, and the tax exemption policy for small packages will be canceled. Trump also announced that a 25% tariff will be imposed on foreign-imported automobiles, effective immediately. Additionally, starting May 2, the tax exemption policy for packages under $800 will be canceled, with a charge of 30% of the goods' value or $25 per item.
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Trump stated that if trade partners take &#34;corrective&#34; measures, some tariffs may be lifted. In the executive order, Trump stated that if trade partners take significant measures to &#34;correct&#34; non-reciprocal trade arrangements and align fully with the U.S. on economic and national security issues, they may reduce or limit the scope of tariffs imposed under this order. Conversely, if they retaliate against the U.S., tariffs will continue to increase.
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2. The overall strength of reciprocal tariffs is relatively high; pay attention to how other countries respond, the negotiation process with the U.S., and actual implementation
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<li>The overall strength of Trump's reciprocal tariffs is relatively high, but there is still time before they take effect, which may allow for negotiations or communications. The overall strength of this reciprocal tariff is high; the overall tariff rate on U.S. imported goods in 2024 (tariff revenue/total import value) is only 2.3%. If the current tariff policy is implemented, the effective tax rate will significantly increase from this basis, resulting in severe impacts on the U.S. and global economy. However, it should be noted that the effective date for the additional personalized tariffs set by Trump is April 9, indicating that he may be waiting for responses from trade partners. Therefore, attention should be paid to negotiations and communications between the U.S. and some trade partners during this period</li>
<li>There is a high probability of certain exemptions, focusing on the actual implementation of tariff policies. As mentioned above, Trump set a grace period, and his negotiation intentions are relatively clear. Moreover, Canada and Mexico are not included in this list of tariff countries, and the executive order states that goods compliant with the United States-Mexico-Canada Agreement (USMCA) may be exempt. Combined with earlier statements from countries like India expressing willingness to reduce tariffs on certain products to reach trade agreements with the U.S., the bank believes it is highly likely that the U.S. will grant certain countries/products some degree of tariff exemptions or reductions, and the final actual implementation strength should decrease. There may even be some exemptions before the policy takes effect.</li>
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3. There may be a significant increase in tariff rates on our country, and domestic policies may take action
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Trump has significantly increased the tariff rates on our exported goods, overall possibly exceeding 60%. The additional 34% tariff imposed by Trump on our goods, combined with the previous 20% additional tariff imposed under the pretext of fentanyl and the approximately 10.9% actual tariff rate (actual tariffs collected/all imported goods) imposed during his first term, means that the tariff rate on goods exported from our country to the U.S. will exceed 60%, representing a substantial increase. If implemented, based on the bank's previous report estimates (&#34;Relatively Considerable View on Tariff Impact&#34;), it could drag down our exports to the U.S. by more than 30%. Total exports will decline by over 4.5%, and GDP growth will be dragged down by more than 1.3 percentage points year-on-year.
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Domestic policies may continue to take action to hedge against potential tariff impacts. The bank believes that, referencing the first phase of trade friction and negotiations between China and the U.S., there may also be related negotiations in the future. However, due to Trump's invocation of the International Emergency Economic Powers Act (IEEPA), the uncertainty of the negotiation process may increase. In this context, domestic policies may be introduced to expand domestic demand to respond to the potential impacts of tariff policies on our exports and economy, focusing on the implementation of reserve requirement ratio cuts and interest rate reductions, as well as possible incremental fiscal policies (such as stabilizing real estate and boosting consumption).
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For the market, the significant increase in reciprocal tariff policies may suppress market risk appetite in the short term, putting pressure on risk asset prices. The three major U.S. stock index futures fell sharply after the announcement of the tariff policy; U.S. Treasury yields also dropped significantly, with the 10-year Treasury yield approaching 4.0%; gold prices rose significantly, with the current COMEX gold price nearing $3,200 per ounce.
Risk Warning
The U.S. economy may experience an unexpectedly severe recession

KaiYuan Securities released a research report stating that the "reciprocal tariffs" announced by Trump exceed market expectations and may increase the risk of "stagflation" in the U.S. The tariffs will raise U.S. PCE inflation by 1.9 percentage points and reduce real GDP growth by 1.3 percentage points. The Federal Reserve will find it difficult to cut interest rates in the short term in the face of stagflation risks, increasing the risk of economic downturn and adding pressure for market adjustments. Trump will impose an additional 10% basic tariff on all countries and higher tariffs on countries with significant trade deficits

- On April 3, 2025, Trump announced a new "reciprocal tariff" policy, exceeding market expectations, which combines blanket tariffs with country-specific rates affecting over 60 economies.  
- The proposed tariffs could raise U.S. PCE inflation by 1.9 percentage points and reduce GDP growth by 1.3 percentage points, while potentially generating over $700 billion in revenue.  
- The policy may increase economic uncertainty and the risk of stagflation, leading the Federal Reserve to adopt a wait-and-see approach, complicating short-term interest rate decisions.

Open Source Securities: Trump announces "reciprocal tariffs" exceeding expectations, exacerbating the risk of "stagflation" in the U.S. economy