Last Wednesday, President Trump unveiled 10% tariffs on all countries, plus additional tariffs on about 60 other countries. The S&P 500 dropped 5% the next day in what The New York Times called “its worst showing since June 2020.”
Foreign countries have also pledged to respond. On Friday, China imposed 34% tariffs on U.S. goods. The president of the European Commission announced the E.U. was planning “further countermeasures,” and Vietnam created a rapid response team to figure out how to address the new trade policies.
Commercial prediction market Kalshi notes that many countries are increasingly likely to retaliate with their own tariffs on the U.S.. With a few exceptions—such as Mexico and Brazil, which have been negotiating with the U.S. over earlier hikes—odds spiked on “Liberation Day.
How will American allies fare in the new global economy?
Two of the United States’ closest allies, the E.U. and Canada, have had to adjust to newly hostile relations since Trump launched his trade war. The E.U. is getting an additional 20% tariff that goes into effect on April 9.
Kalshi’s forecast of tariff size against the EU aligns with Trump’s announcement. However, the market will not resolve to “Yes” until the tariffs are implemented. The market could be waiting to see whether Trump issues an exemption for the EU that adjusts its tariff rate before the odds rise from about 80% to the high 90s
Canada was exempt from additional tariffs during Trump’s Liberation Day announcement because it had already faced 25% tariffs since March. Kalshi offers a market on when tariffs on Canada will end, forecasting a strong chance they’ll extend at least into 2026.
The market on Canadian tariffs will resolve simply when there’s an announcement that the tariffs are coming to an end rather than when they officially conclude. Adjustments to the tariff rate—short of eliminating it—also will not settle the market.
As the world adjusts to economic aggression from one of its largest powers, these markets will be among the most important to watch.
