Investors head into Trump tariff deadline benumbed and blase
Just days before the end of a 90-day pause he announced on his April 2 "Liberation Day" tariffs, Trump said the first batch of letters outlining the tariff levels they would face on exports to the United States would be sent to 12 countries on Monday.
Investors who have been tracking this date for months expect more details to emerge in the coming days and protracted uncertainty too, anticipating Trump will not be able to complete deals with all of America's trading partners in the coming week.
And they are not overly concerned.
"The market has gotten much more comfortable, more sanguine, when it comes to tariff news,' said Jeff Blazek, co-chief investment officer of multi-asset at Neuberger Berman in New York.
"The markets think that there is enough 'squishiness' in the deadlines — absent any major surprise — to not be too unsettled by more tariff news and believe that the worst-case scenarios are off the table now.'
Both the tariff levels and effective dates have become moving targets. Trump said on Friday that tariffs ranging up to 70% could go into effect on Aug. 1, levels far higher than the 10% to 50% range he announced in April.
So far, the U.S. administration has a limited deal with Britain and an in-principle agreement with Vietnam.
Deals that had been anticipated with India and Japan have failed to materialize, and there have been setbacks in talks with the European Union.
World stocks are meanwhile at record highs, up 11% since April 2. They fell 14% in three trading sessions after that announcement but have since rallied 24%.
"If Liberation Day was the earthquake, the tariff letters will be the aftershocks. They won't quite have the same impact on markets even if they are higher than the earlier 10%," said Rong Ren Goh, a portfolio manager in the fixed income team at Eastspring Investments in Singapore.
"This financial system is so inundated with liquidity that it is hard to cash up or delever at the risk of lagging the markets, with April serving as a painful reminder for many who derisked and were then forced to chase the relentless recovery in the subsequent weeks."
Shipping containers in Oakland, California, on May 12 |
REUTERS
Investors have also been distracted by weeks of wrangling in the U.S. Congress over Trump's massive tax and spending package, which he signed into law on Friday.
Stock markets have celebrated the passage of the bill, which makes Trump's 2017 tax cuts permanent, while bond investors are wary the measures could add more than $3 trillion to the nation's $36.2 trillion debt.
The S&P 500 and Nasdaq indexes closed at record highs on Friday, notching a third week of gains. Europe's STOXX 600 benchmark is up 9% in three months.
But the risks of tariff-related inflation have weighed on U.S. Treasurys and the dollar, and jostled expectations for Federal Reserve policy. Rate futures show traders no longer expect a Fed rate cut this month and are pricing in a total of just two quarter-point reductions by year-end.
The dollar has suffered a knock to its haven reputation from the dithering on tariffs. The dollar index, which reflects the U.S. currency's performance against a basket of six others, has had its worst first half of the year since 1973, declining some 11%. It has fallen by 6.6% since April 2 alone.
"The markets are discounting a return to tariff levels of 35%, 40% or higher, and anticipating an across-the-board level of 10% or so,' said John Pantekidis, chief investment officer at TwinFocus in Boston.
Pantekidis is cautiously optimistic about the outlook for U.S. stocks this year, but the one variable he is watching closely is interest rate levels.
For now he expects to see interest rates dip in the second half, "but if the bond market worries about the impact of the bill and rates go up, that's a different scenario.'
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Kyodo News
12 minutes ago
- Kyodo News
Trump says 25% tariffs to be slapped on Japan, South Korea on Aug. 1
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Kyodo News
12 minutes ago
- Kyodo News
Kyodo News Digest: July 8, 2025
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Japan Times
2 hours ago
- Japan Times
Trump announces new tariff rate on Japan — and extension of deadline to Aug. 1
The United States will raise its 'reciprocal tariff' on Japan to 25% effective Aug. 1, President Donald Trump said in a letter addressed to Prime Minister Shigeru Ishiba on Monday, less than two weeks before a crucial Upper House election. 'We have had years to discuss our Trading Relationship with Japan, and have concluded that we must move away from these longterm, and very persistent, Trade Deficits engendered by Japan's Tariff, and Non Tariff, Policies and Trade Barriers,' Trump wrote. The new 25% duty rate — which is just slightly higher than the 24% rate announced on April 2 — will be charged on almost all Japanese goods entering the United States. The rate is also separate from sectoral tariffs that are currently in place, which include 25% on vehicles and auto parts and 50% on steel and aluminum. Goods shipped via a third country to avoid higher tariffs will not be immune, Trump wrote. He also noted that if Japan raises tariffs on American exports, the same number will be added onto the 25% the U.S. charges. New vehicles from Japanese auto maker Honda are seen at a parking lot in the Port of Richmond in San Francisco on Monday, as trade tensions escalate after U.S. President Donald Trump said he would impose a 25% tariff on goods from Japan starting Aug. 1. The Trump administration announced its reciprocal tariffs on dozens of countries on April 2, then put the framework on a 90-day pause two days later, during which a 10% baseline rate remained in place. Countries had been required by the U.S. to strike a deal by July 9 to avoid the higher rate from going into effect again. Ironically, Trump's attempt to ramp up pressure by sending out ultimatums has gained Japan a few more weeks. The U.S. president signed an executive order later Monday to extend the deadline until Aug. 1. Voters in Japan will head to the polls on July 20 for an Upper House election that is expected to be a tough go for Ishiba and his ruling Liberal Democratic Party. Ishiba and South Korean President Lee Jae Myung became the first recipients of Trump's letters. The president announced later in the day that similar letters were sent to countries including South Africa, Malaysia, Myanmar and Laos, with the new tariff rate set as high as 40%. Trump had berated Japan for three days in a row last week for the lack of progress in trade talks between the two countries, while threatening to take tariffs to as high as 35% at one point. Ryosei Akazawa, Japan's chief tariff negotiator, talked with U.S. Commerce Secretary Howard Lutnick over the phone last Thursday and Saturday following Trump's angry remarks. Ishiba will convene a tariff task force meetingTuesday following the latest announcement, according to reports.
