President Donald Trump's reciprocal tariffs have rocked commodity markets, with almost all sub-asset classes displaying losses and dragging down the Bloomberg Commodity Index.

As the risk of a U.S.-led global recession has risen substantially, BMI expects investor sentiment to tilt towards expectations of a challenging demand outlook for commodities in the coming weeks.

While this would be somewhat mitigated by a weakening U.S. dollar, which is likely to prevent a full collapse in most commodity prices, the brokerage said.

It expects negative sentiment to hurt industrial metals, oil and agricultural grains most, while natural gas and agricultural softs remain supported by supply side factors at the moment.

Oil and gas imports to the U.S. have been exempted from the new round of tariffs. That said, crude markets responded to the tariff announcement by sending prices sharply lower with Brent (CO1:COM) down -3.40% to $67.75 a barrel, and WTI (CL1:COM) -3.64% to $64.52 a barrel by 6 am ET.

ETFs: (XLE), (NYSEARCA:USO), (BNO), (UCO), (SCO), (USL), (DBO), (DRIP), (GUSH), (USOI), (UNG), (BOIL), (KOLD), (UNL), (FCG)

Industrial metal prices have also seen some losses following the tariffs, and BMI maintains the view that tariffs will prove bearish for the industrial metals sub-asset class, with the risk of a deceleration in economic growth in major markets posing a major headwind to metals demand.

“Moreover, tariff threats continue to remain in focus for metals, despite current exemptions from reciprocal tariffs, for instance for copper, keeping the markets on edge in the coming weeks.”

ETFs: (CPER), (NYSEARCA:COPX), (OTC:JJCTF)

Gold (XAUUSD:CUR) has meanwhile benefited from escalating trade tensions, reaching an all-time high of $3,168/oz on April 3, and analysts expect bullion to have further room to run.

In softs, amidst the prevailing concerns of U.S. tariffs overshadowing the commodities landscape, the narrative for agricultural softs remains driven by fundamental forces. The U.S. is a major exporter of cotton, and the risk of retaliatory tariffs on U.S. cotton exports looms large.

ETFs: (WEAT), (SOYB), (CORN), (DBA), (NYSEARCA:MOO)