Dear Readers,

We are back with Proflex’s Macro series and today we talk about a global shift in trade policy that is taking shape.

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Trump Administration Announces New Tariffs

On April 2, the Trump administration released a press statement announcing a new wave of tariffs, marking a renewed phase in America’s attempt to reshape its manufacturing and trade dependencies. These tariffs will apply to a wide range of consumer and industrial products but strategically exclude semiconductors, pharmaceuticals, and key commodities.

The official objective, as outlined in the release, is to “protect American industry, reduce dependence on adversarial supply chains, and ensure economic resilience by incentivizing domestic production.” The administration reiterated its commitment to enforcing trade practices that “reflect American values, security interests, and long-term industrial strategy.”

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Understanding the Broader Intent: Ending China’s Manufacturing Monopoly

Beyond the press release, this move is part of a longer-term geopolitical and economic realignment. The U.S. aims to dismantle China’s monopoly over global manufacturing and, ideally, re-shore production or diversify it among friendlier allies. A critical vulnerability highlighted by both the Trump and Biden administrations has been overreliance on China not just for manufacturing but also for logistics—especially maritime trade routes, many of which are effectively under Chinese influence.

While the Biden administration approached this challenge via the CHIPS Act, selective tariffs, and subsidies, the Trump administration is opting for a more aggressive, unilateral tariff-based approach. But the underlying bipartisan consensus is clear: America’s dependence on China poses strategic and economic risks that must be addressed.

However, there are criticisms of this approach. Rather than starting with manufacturing incentives, which would have allowed for smoother long-term adjustments, the administration is leading with punitive tariffs. Trump’s ambition to compress what should be a 10–20 year industrial transformation into a 4-year term risks causing volatility and economic disruption in the short term.

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Who Gains? Who Loses?

Notably, the USMCA (U.S.–Mexico–Canada Agreement) framework is left intact, with the administration signaling openness to renegotiate and possibly exempt USMCA partners from certain tariffs. This has important implications:

• Mexico stands to benefit significantly as U.S. companies look for nearshoring alternatives.
• India could be another winner if it can position itself as a low-cost, reliable, and non-Chinese-dependent manufacturing and shipping partner. Much will depend on India’s ability to secure favorable trade terms and streamline its logistics infrastructure.

Meanwhile, China remains the unambiguous target, with no active negotiations currently underway between Washington and Beijing.

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Sector Impact: Minimal Near-Term Market Shock​
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Despite the bold headlines and hit to sentiment, major U.S. tech companies should not see big impact. This is partly because the tariffs exclude semiconductors, critical commodities, and pharmaceuticals, thereby shielding market leaders like NVIDIA, Eli Lilly, and others from immediate disruption.

However, Apple could face a more significant challenge. While its component ecosystem is deeply embedded in China, it may now accelerate efforts to diversify manufacturing to countries like India or within the USMCA zone. For Apple and similar companies, the writing on the wall is clear: dependency on Chinese assembly lines is a strategic liability.

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Bond yields are dropping – Big Win for Local Manufacturing​
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As inflation is trending down, and investors are moving to safe havens, bond yields are also falling—this is great news for both consumers and businesses. Here’s why it matters:

Lower Interest Rates = Lower Cost of Capital

• Borrowing is getting cheaper across the board.
• This directly benefits local manufacturers, who now face fewer financial hurdles to invest in factories, equipment, and jobs.
• It aligns perfectly with the Trump administration’s push to bring manufacturing back to the U.S..

From Taxes to Tariffs – A Structural Shift

• The administration is proposing tax cuts, with a clear goal of shifting revenue collection from income taxes to tariffs on imports.
• This strategy encourages domestic production while making foreign (especially Chinese) goods less competitive.

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Turning Point: From Worst-Case to Opportunity

• Markets seem to have priced in a worst-case scenario over the past few weeks and Trump has started from a place where the initial tariffs are unreasonable and arbitrary. This has created opportunity for investors to invest in stocks while we are seeing panic selling.
• Now, we could be entering a phase of more constructive news—including potential trade deals, manufacturing investments, and supply chain shifts that benefit allies like Mexico and India.
• Most importantly, the stage is set for Tax cuts and other fiscal stimulus measures like more interest rate cuts while we are already seeing cost of capital coming down.

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But Risks Remain

• There’s still a risk that China, the EU, or other trade partners retaliate, escalating this into a broader trade war.
• We got to watch our portfolios carefully if the correction becomes deeper over next month or two. But we do see a path for normalcy in second half of 2025 and beyond.

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Proflex Subscribers – Staying Ahead of the Curve 📈

Separating Noise from Signal: In volatile markets, we help subscribers stay disciplined and focus on strategic long-term opportunities.

Feel free to send us your queries at proflex@blockstart.one

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Best regards,

Raman Bindlish

Editor-in-Chief,

Blockstart Research

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