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The term "tariffs respite" refers to a temporary period of relief from tariffs. In essence, it signifies a pause or reduction in the application of taxes imposed on imported goods. Here's a breakdown of what that entails:

• Temporary Relief: A "respite" implies that the change is not permanent. It's a break from existing tariffs, suggesting that they could be reinstated or altered in the future.

• Tariff Reduction or Pause: This can involve either a complete suspension of tariffs or a decrease in their rates.

• Context: Tariff respites often occur in situations of: Trade negotiations: As a gesture of goodwill or to facilitate progress. Economic fluctuations: To alleviate burdens on industries or consumers during challenging times. Political strategy: To address specific concerns or achieve political objectives.

In this article, I would like to discuss while a tariffs respite provides a temporary window of reduced or eliminated tariffs, it offers a degree of relief to affected industries and consumers.

But we as investors need to understand that the stock market typically reacts based on expectations of reduced trade friction, lower costs for businesses, and improved global economic sentiment.

Here are some of the potential impacts and factors we might want to look at on how we trade as we look forward to 02 April 2025.

Immediate Market Reaction

Positive Sentiment: A tariff respite is usually seen as a de-escalation of trade tensions, which reduces uncertainty. Markets often rally, particularly in sectors most exposed to tariffs (e.g., industrials, technology, agriculture, and automakers).

Sector-Specific Gains

Exporters and Multinationals: Companies reliant on global supply chains (e.g., $Apple(AAPL)$ , $Tesla Motors(TSLA)$ , semiconductor firms) may surge as reduced tariffs lower input costs and ease cross-border operations.

Consumer Discretionary: Retailers and consumer goods companies benefit from cheaper imports, potentially passing savings to consumers and boosting profit margins.

One of the e-commerce companies in U.S. would be $Amazon.com(AMZN)$

Industrials/Manufacturing: Reduced tariffs on steel, aluminum, or machinery parts lower production costs, lifting earnings expectations.

Emerging Markets: Stocks in tariff-affected countries (e.g., China, Mexico) may rise as export-dependent economies regain access to key markets.

Currency and Commodity Markets

Currency Movements: A tariff truce could weaken safe-haven currencies like the U.S. dollar or Japanese yen as risk appetite returns. Export-oriented currencies (e.g., Chinese yuan, Mexican peso) may strengthen.

Commodity Prices: Industrial metals (e.g., copper, steel) and energy (oil) often rise on optimism about global growth and manufacturing activity.

Long-Term Considerations

Supply Chain Relief: Companies may delay or reverse plans to relocate production (e.g., "reshoring"), stabilizing earnings forecasts.

Inflation Outlook: Lower tariffs reduce import costs, potentially easing inflationary pressures. This could influence central bank policies (e.g., slower interest rate hikes).

Market Volatility: While initial reactions are positive, gains may fade if the respite is temporary or lacks concrete trade-deal follow-through.

If we looked at the current $Cboe Volatility Index(VIX)$ level, we can see that market have react since President Trump give a hint that we might be looking at a tariffs respite, which saw VIX below 20 now from its high at above 27. When the VIX (CBOE Volatility Index) is below 20, it generally indicates a period of relatively low market volatility and increased investor complacency.

Low Volatility: The VIX measures the expected volatility of the S&P 500 index over the next 30 days. A reading below 20 suggests that the market anticipates relatively small price fluctuations in the near term.  

Investor Complacency: Low VIX values can also signal that investors are feeling confident and less concerned about potential market downturns. This can sometimes lead to a sense of complacency, where investors may underestimate the risks involved.  

Market Sentiment: Essentially, a VIX below 20 often reflects a perception of stability and a lack of fear in the market

But it is important that we do not get complacent, I would think that we still stick to our own strategy but adjust accordingly to how the market is moving.

Historical Examples

2019 U.S.-China "Phase One" Trade Deal: Stocks rallied sharply, with the S&P 500 gaining ~15% in Q4 2019 as tariffs were partially rolled back.

2020 USMCA (NAFTA Replacement): Reduced North American trade uncertainty boosted auto and agricultural stocks.

EU-U.S. Tariff Truce (2021): A pause in Airbus-Boeing tariffs lifted aerospace and defense shares.

Which Sectors We Could Look At

Temporary vs. Permanent Relief: Markets may discount short-term respites if structural trade issues (e.g., tech rivalry, IP disputes) remain unresolved.

Sector Losers: Domestic industries previously shielded by tariffs (e.g., U.S. steelmakers, Chinese soy farmers) could face renewed competition, weighing on their stocks.

Macro Overrides: Broader factors (e.g., interest rates, recession risks) may overshadow tariff news.

If I were to consider the above factors, the sectors I think as investors we could look at are as follows:

• Automotive: The automotive industry often relies on complex international supply chains. Tariffs on imported parts or finished vehicles can significantly increase costs. A tariff respite could ease these burdens, potentially boosting profitability for automakers and lowering prices for consumers.  

  This is highlighted in the search results, with specific mention of how automotive manufacturers are directly affected by tariffs.

• Manufacturing: Many manufacturing sectors, particularly those involving heavy machinery, electronics, and materials, depend on imported components. A respite could reduce input costs, making these industries more competitive.  

  Sectors that involve heavy international supply chains, would see benefits from reductions of tariffs.

• Retail/Consumer Goods: Tariffs on imported consumer goods can lead to higher prices for everyday items. A respite could provide relief to consumers by lowering the cost of imported products, potentially stimulating consumer spending.  

  Tariffs directly effect the cost of goods for consumers, therefore a respite of those tariffs, would provide benefits to the retail sector.

I would look at the $Consumer Discretionary Select Sector SPDR Fund(XLY)$ which would cover stocks like Amazon and Tesla, they would stand to gain if there is a tariffs respite on 02 April 2025, as we can see that

If we looked at how market might priced in the tariffs for the consumer discretionary sector, we could see a recovery coming from XLY, as it is making its move above the 12-EMA with RSI also rising above the oversold region, this could signal a momentum building up for the consumer discretionary sector.

I will be watching Tesla and also might load more Amazon stock.

Summary

A tariff respite generally fuels a risk-on rally, especially in globally exposed sectors, while easing inflation and supply chain concerns. However, sustained gains depend on whether the respite evolves into lasting trade policy and aligns with broader economic conditions.

I think we as Investors still need to watch out for the followings.

• Follow-through on trade negotiations.

• Earnings guidance revisions from tariff-sensitive companies.

• Central bank responses to shifting inflation dynamics.

Appreciate if you could share your thoughts in the comment section whether you think tariffs respite would help the consumer discretionary sector.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.