New York
CNN
—
President Donald Trump is threatening to revive his trade war. Wall Street isn’t too concerned.
Global markets were relatively calm Tuesday after Trump on Monday ratcheted up his tariff campaign — but extended the deadline to August 1 and said he was open to negotiations. That provided a sense of optimism for investors.
Stocks across Asia — including in Tokyo, Seoul, Hong Kong and Mumbai — were higher on Tuesday. US stocks were mixed: The Dow fell 166 points, or 0.37%. The S&P 500 fell 0.07% and the tech-heavy Nasdaq gained just 0.03%.
Market movements were relatively muted, signaling investors think Trump’s new tariffs are more negotiating tactics than firm policy. It’s a noticeable change from early April, when Trump’s “Liberation Day” tariffs sent stocks plummeting.
Three months after Trump initially announced massive “reciprocal” tariffs and then instigated a 90-day pause, Wall Street is looking through the tariff rhetoric.
“This latest round of tariff news feels more like an aftershock, one the market was prepared for, rather than the seismic event that shook markets on ‘Liberation Day’ over three months ago,” Tony Sycamore, market analyst at IG Australia, said in a note.
Trump on Tuesday said on social media that “no extensions will be granted” after the August 1 deadline.
Trump late Monday had told reporters at the White House that the August 1 deadline is “firm, but not 100% firm.”
The tariff letters are “more or less” final offers, Trump said. “I would say final, but if they call with a different offer and I like it, we’ll do it.”
“If they call up and they say ‘we’d like to do something a different way,’ we’re going to be open to that,” the president said.
“Yesterday’s letters and tariff tweets, I would categorize it as same threat, different goalpost,” Kurt Reiman, head of fixed income at UBS Global Wealth Management, said.
Investors in recent weeks have embraced the “TACO trade,” betting that “Trump always chickens out” on his major tariff threats — especially if there is an adverse reaction in markets.
“This opens the door for another round of ‘TACO Tuesday,’ Trump-style,” Sycamore said.
US stocks fell on Monday after Trump announced a slew of new tariffs, but losses were relatively contained: The Dow, S&P 500 and Nasdaq finished the day lower by less than 1%.
Wall Street has wrestled with Trump’s on-and-off tariffs for months. While the president is considering reigniting his trade war, investors say markets are taking it with a grain of salt.
“Markets have broadly shrugged off the tariff news overnight,” Frederic Neumann, chief Asia economist at HSBC, said. “Essentially, the door remains open for individual economies to whittle down proposed tariffs through negotiations.”
“Investors are taking the glass-half-full view at the moment, enjoying the reprieve from the deadline extension, rather than focus on the reiteration of the potential tariff levels should negotiations fall through,” he added.
The new tariff announcements are a “speed bump” as opposed to something that would “derail” the momentum in stocks, according to Mohit Kumar, chief strategist and economist for Europe at Jefferies.
“Singling out certain countries for higher tariffs is a way of putting pressure on these and other countries to agree to a deal sooner rather than later,” Kumar said.
Trump so far has only announced frameworks for trade deals with the United Kingdom, China and Vietnam. Peter Navarro, White House senior counsel for trade, had said in April the administration would pursue “90 deals in 90 days.”
Trump on Monday sent letters to 14 countries outlining proposed tariff rates. Investors are still keeping their eyes peeled for announcements about potential deals or tariff letters for dozens of trading partners including India, Taiwan and the European Union.
The S&P 500 has notched four record highs since June 27 as investors have begun to look past tariff anxieties. Wall Street heavyweights are expecting a push to higher levels.
Bank of America on Tuesday raised its year-end forecast for the S&P 500 to 6,300 from 5,600. Goldman Sachs on Monday raised its year-end forecast for the S&P 500 to 6,600 from 6,100, citing expectations of sooner-than-anticipated Federal Reserve rate cuts, “fundamental strength” of large US stocks and “investors’ willingness to look through likely near-term earnings weakness.”
Analysts at Barclays said in a June note that markets were beginning to “turn the page” on tariffs to focus more on how artificial intelligence is impacting corporate earnings and how economic data continues to hold up.
David Wagner, portfolio manager at Aptus Capital Advisors, said he thinks tariffs are at the lower end of the list of things markets are concerned about.
“I think the market has moved on from it,” he said. “If there was some market volatility, Trump’s probably going to give in.”
Investors are now viewing tariff uncertainty within the broader context of Trump’s agenda, Michael Reynolds, vice president for investment strategy at Glenmede, said. Trump last week succeeded in passing his budget bill, which provided more clarity for Wall Street.
Wall Street is still betting Trump won’t push for tariff rates on other countries that would destabilize the global economy, enabling stocks to grind higher. Some analysts warn of complacency.
“This modest reaction is perhaps a function of the market pricing in the ability to negotiate down tariffs, or perhaps a continuation of the TACO trade,” said Michael Wan, senior currency analyst at MUFG, in a note. “We are not so sure on our end, and it does seem to us like overall risk assets seem too sanguine to these tariff rates which are essentially quite similar to Liberation Day.”
Copper prices surged to record highs on Tuesday after Trump said he plans to levy a 50% tariff on imports of the red metal.
Sarah Bianchi, senior managing director at Evercore ISI, said in a note that Trump is “feeling good about recent victories” and with stocks near record highs, he is more likely to lean into imposing his tariff agenda.
Inflation data for June will be released next week, providing more insight into the economic impact of tariffs. In the meantime, investors will be on the watch for announcements about potential trade deals or tariffs.
“With the proverbial can likely to be kicked further down the road, leaving negotiators a bit more room to maneuver … markets are pricing little signs of concern,” analysts at Barclays said in a note. “However, it remains prudent to consider all possible scenarios, given the narrative around tariffs remains quite fluid and Trump maintains a ‘do whatever we want’ position.”
