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Trump's April 2 planned tariff announcement in focus

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Stakes high as S&P 500 hovers near recent lows

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Wall St 'fear gauge' higher

(Updates with global market reaction)

By Saqib Iqbal Ahmed

NEW YORK, April 2 (Reuters) - Global investors are close

to getting some clarity on the Trump administration's tariff

plans on Wednesday, but with little detail on what to expect,

financial markets remain on edge.

U.S. President Donald Trump has for weeks pegged April 2 as

"Liberation Day", when he plans to impose an array of new

tariffs that could upend the global trade system.

Tariffs also have big implications for corporate

earnings, global growth, inflation and Federal Reserve interest

rate policy.

Investors had kicked off the year with high hopes for

pro-growth policies from the Trump administration but have been

spooked by a barrage of tariff-related headlines.

While investors broadly agree that Wednesday's long-awaited

announcement could be pivotal for the near-term outlook for

global financial markets, they are unsure about which way prices

will swing and what will come next as negotiations could be

protracted.

"I can't recall a situation where the stakes were this high

and yet the outcome was so unpredictable," said Steve Sosnick,

chief strategist at Interactive Brokers. "The devil is going to

be in the details and nobody knows the details."

The White House confirmed on Tuesday that Trump will impose

new tariffs on Wednesday, without providing details about the

size and scope of trade barriers that have businesses, consumers

and investors fretting about an intensifying global trade war.

White House spokesperson Karoline Leavitt said reciprocal

tariffs on countries that impose duties on U.S. goods would take

effect once Trump announces them, while a 25% tariff on auto

imports will take effect on April 3.

Lack of clarity on whether there will be one flat tariff

rate for all imports or whether the administration takes a more

fragmented approach has made modeling the ultimate impact of the

tariffs on earnings, growth and inflation a daunting challenge.

"Ideally, we just get one number and then we can figure out

the downstream impact," said Sonu Varghese, global macro

strategist at Carson Group.

"But my fear is that we won't get that, or even if we get

one number that will be subject to negotiations," he said.

Wednesday's announcement feels particularly crucial after

the S&P 500 confirmed a correction, a drop of 10% from a recent

high, in mid-March. The index was last down about 8% from its

February record high.

"We are at a very tenuous spot, being at the bottom of a

corrective trading range ... that leaves us poised for either a

very sharp bounce or a scary breakdown," Sosnick said.

Heightened uncertainty over the tariff news and potential

market reaction lifted the Cboe Volatility Index - an

options-based measure of investor anxiety - to a more than

two-week high of 24.80 on Monday. The index finished Tuesday at

22.77.

"I think the market is really holding its breath," said Mark

Spindel, chief investment officer at Potomac River Capital LLC,

who expects the so-called fear gauge to climb toward 30, a level

associated with a high degree of risk aversion.

Traders in the options market were braced for a roughly

1.3% swing in the S&P 500, on Wednesday.

Tariff woes have pushed Japan's blue-chip Nikkei stock index

to its lowest since September, and taken the edge off a

stunning rally in European stocks.

European markets opened broadly lower on Wednesday.

PLAY DEFENSE

The tariffs announcement could also spur sharp moves in

the dollar, euro and safe-haven gold.

U.S. manufacturing contracted in March after growing for two

straight months, while a measure of inflation at the factory

gate jumped to the highest level in nearly three years as

anxiety rose over import tariffs, survey data out on Tuesday

showed.

Recent tepid consumer spending numbers have raised the

specter of lackluster economic growth and higher inflation. That

could put the Fed, which paused its easing cycle in January to

monitor the impact of tariffs, in an uncomfortable position.

For Anthony Saglimbene, chief market strategist at

Ameriprise Financial, the risk is that Wednesday's announcement

will offer no clarity on tariffs.

"The market to some extent has discounted the cumulative

negative effect of tariffs on potential economic growth and

corporate profitability," he said.

"The negative reaction in the market would be if the details

of those tariffs still leave open a lot of questions about what

it includes, who it includes."

Investors flummoxed by the wide range of possible outcomes

from Wednesday's news would do well to not put all their eggs in

one basket, analysts said.

"The bottom line is in the face of uncertainty that's

flirting at levels that we haven't seen since the pandemic or

the financial crisis, you need to be diversified," said Jack

Ablin, chief investment officer at Cresset Capital.