Morning from Copenhagen.

An eventful weekend, with the first tariffs now in place, targeting 25% tariffs against Mexico and Canada while China is being hit with 10%. While almost everything was hit heavily during the Asian open, this is somewhat different from the Deepseek story sentiment-wise, and we are seeing equities and the likes decently bid from the European open (from lows), unlike what we saw throughout the day last Monday.

While sentiment hints at strong net long positions in the USD, we are of the view that tariffs will end up hurting growth more than they will increase inflation, and we will hence see bond yields and the USD down as the tariff narrative unfolds. The question is whether tariffs will come at all, and market-based measures such as Polymarket are already pricing in the rollback of tariffs before May as a coin toss. We know that Trump will meet with Trudeau later today—maybe it will end before it even begins? The big thing to look out for is how large the tariffs targeted towards the EU will be and when they come, as pockets of Europe like Germany are very export-reliant. We find the risk/reward in being short Europe vs. Asia (where Trump surprisingly is much more benign with tariffs) decent.

However, it’s incredibly hard to trade the Trump administration and their policies, and there is little to no money to be made from trying to guess what he will do next. Instead, we try to focus on the underlying macro trends and hedge the noise in the best way possible.

Chart 1.a: Odds of Trump removing tariffs on Mexico before May