Analysts and economists debate the depth of the global tariff war and its effects. For now, they indicate, it is only possible to project increased market volatility.
By Maximiliano Villena
While not ruled out, global markets showed optimism on Tuesday regarding a potential de escalation of a trade war. The threats of such a battle between the U.S. and Mexico and Canada dissipated on Monday afternoon, prompting a favorable market reaction, although the risk remains.
Alejandro Fernández, partner at Gemines Consultores, states that “Trump uses tariffs as a negotiation tool, but he may ultimately impose them only on China and perhaps the European Union, regardless of whether he employs them to obtain concessions from other countries. We will see higher tariffs—not likely against Chile, but the indirect effects will impact us. These effects include lower growth, rising prices, and reduced global trade, which will affect us in that regard. There is no doubt that there will be significant volatility.”
In the same vein, Tomás Flores, an economist at LyD, notes that “in the previous trade war, tariffs were established in July 2018 and later reduced based on negotiation outcomes. That strategy caused copper prices to drop by approximately 18%. The current situation is different—Trump announces tariffs expecting a swift concession, which he has largely achieved, except with China. The Chinese began preparing for a new trade war as soon as the previous one ended in 2019.”
Over the weekend, President Trump signed decrees raising tariffs on Canadian exports to the U.S. to 25%, wh products such as gas and oil will be subject to a 10% tariff. For Mexico, tariffs reached up to 25% on all goods exported north of its border. However, on Monday afternoon, he suspended them for a month after reaching an agreement with both countries.
In the case of China, the additional tariff will be 10%, adding to the existing one. In response, China announced tariffs of the same percentage, along with a package of measures targeting U.S. companies, including Google, agricultural machinery manufacturers, and the owner of the Calvin Klein fashion brand—minutes after the additional U.S. tariffs on Chinese products took effect.
Despite these measures, markets closed higher during the session. Hugo Rubio, CEO of BTG Pactual Corredores de Bolsa, notes that both Monday and Tuesday, markets reacted to daily news, though they are coming to terms with the idea that using tariffs as a negotiation weapon “is the underlying market premise. I believe the situation with Mexico and Canada is much more contained, but what is happening with the European Union is more delicate because of a marked trade imbalance where the U.S. imports far more goods from Europe.”
Thus, in the coming months, we will see “only volatility. In the U.S., markets will closely monitor quarterly reports, which will attract much attention and drive market movements,” adds Rubio.
The S&P 500 index closed with a 0.72% gain, while the tech-heavy Nasdaq and the industrial Dow Jones rose 1.35% and 0.03%, respectively. In Chile, the IPSA index increased by 1.08%.
Copper was another asset that saw gains today, despite the announcements from China. The three-month copper price rose 1.35% to $4.36 per pound on Comex, while the spot price on the London Metal Exchange climbed 1.43% to $4.079 per pound.
However, Juan Carlos Guajardo, executive director of Plusmining, states that “the only thing we can say is that as long as it remains unclear what the U.S. will do, no firm conclusions can be drawn, as there are many open possibilities”.
Regarding Trump’s announcements of potential tariffs on raw materials, including copper, he questions “whether there will be tariffs on refined copper or copper-based products, whether these will be broadly applied to copper as a commodity for all copper-producing countries, or if they will merely be negotiation tools rather than actual trade measures. Until this is known, we cannot say much. The price of copper and other commodities reflects this—it has fluctuated based on speculation.”
“If a trade war erupts between the U.S. and China, there will undoubtedly be effects. However, until we know what will happen, it is difficult to make definitive statements,” he says, adding that his baseline scenario, which does not consider tariff disruptions, places the average annual copper price at $4.25 per pound.
“The uncertainty surrounding tariffs and the potential risks of a global trade war suggest a challenging short-term outlook (for metals),” Ole Hansen, head of commodity strategy at Saxo Bank, told Reuters.
“However, prices are currently supported by a growing premium for copper in New York over London, driven by concerns about supply disruptions and speculation on possible measures China might take to boost domestic demand,” he added.
In this context, the Chilean peso fell by 15.41 pesos against Monday’s close, reaching 971.59 pesos—its lowest value since December 5, 2024 (971.45 pesos)—and marking its largest daily decline since August 19, 2024 (-16.88 pesos).
All in all, the trade war remains on the horizon, promising more volatility. “We remain focused on these 10% tariffs on China and China’s retaliatory measures, which will add another risk premium to the market,” Helen Given, a currency trader at Monex USA, told Reuters.
“We will see if there is any subsequent negotiation that might mitigate them, as we have seen with Mexico and Canada. But as it stands now, the trade war with China is back in motion,” she added.
Source: La Tercera