Stocks recovered from Trump tariff & Powell panic; Gold slips
·
The market is expecting an eventual 10% minimum
Trump tariff for the EU against the present 30% threat
·
Trump’s latest threat of secondary sanctions on
Russian oil may affect India and China if implemented after 50 days (the Ukraine
war ceasefire issue)
·
The Fed may be united against Trump’s Powell
tantrum
The majority
of Fed officials are supporting Powell's stance of wait & watch till at
least August’25
·
Trump has to clarify his tariff trajectory sooner
rather than later, and continuously playing it back & forth for getting
better deal
·
Overall, fine prints suggest Trump’s August tariff
threat is around 7% lower than April (weighted average and share of imports
basis)
On Saturday, July 12, 2025, US President Trump
announced/threatened a 30% tariff on all goods imported from the European Union
(EU) and Mexico, effective August 1, 2025, escalating trade tensions with two
of the USA’s largest trading partners. The announcement was made via letters
posted on Truth Social, addressed to European Commission President Ursula von
der Leyen (VDL) and Mexican President Claudia Sheinbaum. The escalated Trump
tariff and Powell resignation tensions caused some pressure on stock futures,
while Gold surged early EU session (July 14).
Trump’s
August EU Tariffs threat:
The 30% latest tariff replaces a previously
proposed 20% rate from April 2, 2025 (Liberation Day), and is lower than a
threatened 50% rate in May. Trump cited the U.S.'s $235.6 billion trade deficit
with the EU in 2024 as a national security threat, demanding "complete,
open Market Access" with no tariffs. The EU, a major exporter of
pharmaceuticals, cars, and machinery, faces potential supply chain disruptions.
European leaders, including von der Leyen, criticized the move, emphasizing a
preference for negotiation but readiness for "proportionate
countermeasures" if needed. EU trade ministers are set to meet on July 14
to discuss responses, including €21 billion in retaliatory measures.
EU's Trade
Chief Sefcovic:
·
Any US deal has
to be acceptable to EU members and the European Parliament
·
I believe there
is still potential to continue US trade negotiations
·
The plan is to
confer with US counterparts later on Monday on the state of play
·
The EU and the US
are working to find a solution for the Section 232 tariffs
·
It was clear
from EU ministers that they would need to go for rebalancing measures if US
talks fail
·
We have seen
some progress on rare earth fast-tracking to the EU
·
We need a systemic
solution to China's rare earth curbs
·
It takes two
hands to clap
Overall, Trump blamed the EU’s VAT of 10-15% and
various non-tariff barriers as an embargo on US goods into the EU. Trump also
pointed out the EU’s ‘sky-high’ tariffs on some US farm products and
transshipment of Chinese goods. Trump often called the EU a ‘mini China’,
sometimes ‘worse than China’!
Trump’s
August Mexico Tariff threats:
April 2025
Tariff Rates: 15.00% (total effective/weighted average)
·
USMCA Goods (~75%): These goods benefited from a 0% tariff rate under
the United States-Mexico-Canada Agreement (USMCA), provided they met origin
requirements.
·
Non-USMCA Goods (~25%): For goods not qualifying under USMCA, the tariff
structure included a 10% basic ad valorem tariff, a 25% ad valorem duty, and a
25% fentanyl levy, totaling 60% (10% + 25% + 25%). This was part of the initial
framework under the February 2025 executive orders, with adjustments reflecting
the fentanyl and migration crisis, though some sources note a 25% base rate was
applied to non-USMCA goods, potentially adjusted by court rulings or
exemptions.
·
Total effective tariff rate (weighted average): 15%
(0% on 75; 60% on 25)
August 2025
Proposed Tariff Rates: 13.75% (total effective/weighted average)
The July 11, 2025, letter from President Trump to
Mexican President Claudia Sheinbaum Pardo announces a 30% tariff on all Mexican
goods effective August 1, 2025, citing trade deficits and security concerns
(fentanyl smuggling). Thus, from August’25:
·
USMCA Goods (~75%): These goods benefited from a 0% tariff rate under
the United States-Mexico-Canada Agreement (USMCA), provided they met origin
requirements.
·
Non-USMCA Goods (~25%): For goods not qualifying under USMCA, the tariff
structure included a 10% basic ad valorem tariff, a 20% ad valorem duty, and a
25% fentanyl levy, totaling 55% (10% + 30% + 25%).
·
Total effective tariff rate (weighted average): 13.75%
(0% on 75; 55% on 25)
The 30% tariffs target Mexico’s alleged failure to
curb fentanyl smuggling and undocumented migration, with Trump stating that
current efforts are "not enough." The tariffs may replace existing
25% duties on non-USMCA-compliant goods, though it’s unclear if USMCA-compliant
goods are exempt. Mexico’s economy ministry called the tariffs
"unfair," but negotiations continue to avoid implementation.
Mexico's
President Sheinbaum:
·
Security
agreement with the US will not include the entry of US security forces into the
nation
·
There has been
very important progress with the US on security issues, and an agreement has
almost been finalized
·
Mexico has a
plan if no tariff deal is reached on August 1st
·
Mexico also has
a plan for tariffs
·
We have done our
part in the fight against fentanyl. The US has to do its part
·
Mexico and the
US have a working scheme until Aug. 1st
In his July 11 Tariff letter, although Trump
praised Mexico’s cooperation on stopping illegal immigration of undocumented
people (Donkey Route), he blasted Mexico for not doing enough on world’s
notorious Mexican cartels for smuggling Fentanyl and other opioids (drugs) into
the US and turned North America into a Narco-Trafficking playground, which
Trump can’t allow. Trump also pointed out Mexico’s tariffs, non-tariff barriers
and Chinese transshipments for the unusually high US trade deficit with Mexico.
Finally, Trump offered a reduction in tariffs if Mexico is successful to
eliminate the Mexican Cartels and stop the flow of Fentanyl into the US.
Economic
Impact: The tariffs could raise
prices and cause job losses in the U.S., with analysts warning of inflationary
effects into 2026. The EU’s trade surplus with the U.S. was €197 billion in
2024, and total U.S.-EU trade reached $2 trillion. Mexico traded $840 billion
in goods with the U.S. in 2024. Industries like German automakers, French
agriculture, and Irish pharmaceuticals are particularly vulnerable.
Global
Context: Trump also sent tariff
letters to 23 other countries, including Canada (35%) and Brazil (50%), with
rates ranging from 20% to 50%. Only the UK and Vietnam have secured preliminary
trade deals. The U.S. has generated $100 billion in customs revenue in the fiscal
year through June 2025, which may reach around $133B by September’25 (FY25).
From FY26, the US is expected to collect ~$300 per year tariffs from US
importers; i.e. $15B on an average/month, totaling almost $3T over the next 10 years.
The US imports around $3T of merchandise goods yearly, almost 45-50% of its
total requirements (consumer goods, industrial items/raw materials).
The latest Trump tariffs headlines risk escalating
into a broader trade war, with the EU and Mexico emphasizing negotiation but
preparing countermeasures. Trump’s motives appear mixed, combining trade
deficit concerns with political leverage (e.g., fentanyl and migration). Trump
is using tariffs as a negotiation tool for both trade and geopolitical war.
Why the
financial market is broadly stable/calm to Trump’s 2nd round of
reciprocal tariffs?
Unlike April’s market panic, stocks have hit record
highs, and bonds remain stable, suggesting investors are less rattled, possibly
due to Trump’s pattern of delaying or modifying tariffs. The market still
believes that Trump may again extend the tariff implementations to till at
least September or even December’25 without causing any supply disruption for
the forthcoming US Festival/shopping season (X-Mas). Various US importers may
have already placed their orders with China and other exporters by May-June, so
that those goods will start to arrive in the US ports from September onwards.
There is
also another factor-detailed analysis indicates Trump’s 2nd round of tariffs (August) is
around 25% vs 32% in the 1st round (April), if we consider net
weighted average tariff rates and share of imports of major trading partners. Trump
may later withdraw all his Fentanyl levy of 25% each on Mexico and Canada and
20% on China to keep 20% final tariffs rates on Canada (on ~10% non-USMCA
goods), 10% tariffs on Canadian energy products & potash; 25% tariffs on
Mexico (on ~25% non-USMCA goods) and 10% on Chinese goods; Chinese tariffs were
already ~25% from Trump 1.0 era. Thus, overall reactions/retaliations after
Trump’s 2nd round of tariffs from major trading partners are
relatively muted.
All of Trump’s tariff letters suggest a willingness
to negotiate with the U.S., and are ready to build or manufacture in the U.S.
Trump wants to offshore manufacturing against the present system of onshore
manufacturing. But it will take significant time & policy effort to make
the US a big manufacturing industrial hub.
Trump’s
secondary tariff threat of 50% on Russian oil may affect China and India if
implemented
On July 14, 2025, President Trump threatened
secondary sanctions on Russia, including "very severe" tariffs, to
pressure Moscow into a ceasefire with Ukraine within 50 days. Announced on July
14 during a meeting with NATO Secretary-General Mark Rutte, the proposal
includes 100% tariffs on Russian goods and secondary tariffs targeting
countries trading with Russia, particularly those buying Russian oil. This
shift reflects growing frustration with Vladimir Putin’s reluctance to negotiate,
despite prior conciliatory gestures. The move aims to isolate Russia
economically, leveraging its $300 billion annual fossil fuel revenue, though
its limited direct trade with the U.S. ($3 billion in 2024) suggests the impact
may hinge on third-country compliance.
The US Congress is considering a bipartisan bill
granting Trump authority for 500% tariffs on nations aiding Russia, but he
seeks control over waivers, complicating passage. Russia’s resilient economy,
bolstered by trade with China and India, and its "shadow fleet" for
oil exports, may mitigate the effect. Past threats, like 25-50% tariffs on
Russian oil buyers in March, have not fully materialized, raising doubts about
enforcement. NATO allies and the EU, already preparing countermeasures to Trump’s
30% EU tariffs, may resist, potentially escalating trade tensions. The 50-day
deadline (mid-September 2025) offers Putin room to maneuver- possibly with
counteroffers, as seen in prior stalled talks.
The EU may suffer most as China and India are buying
cheap/heavily discounted Russian crude oil and supplying the refined Gasoline/Petrol/Diesel
to the EU. Chinese and Indian refiners (like RIL) are also earning heavy
profits from thereof and paying additional taxes to the Government for such
huge gains. As the US is not in a position to supply sufficient oil to the EU,
Trump’s secondary sanctions on Russian oil, if implemented in reality, will
cause higher prices of oil prices. Even in that scenario, the US may benefit
most as it’s now the biggest producer of oil.
The threat may be more symbolic than decisive,
given Russia’s adaptation to sanctions and Trump’s history of delaying action.
Economic pressure on buyers like India and China could backfire, straining U.S.
alliances, while the focus on tariffs over direct military aid questions the
strategy’s effectiveness against a militarily entrenched Russia.
Highlights
of Trump’s comments:
·
We should be
less than 1% (interest rates)
·
Interest rates
are way too high. Each point costs $360 bln
·
Fed Chair Powell
is stupid
·
If Powell
resigns, I will be very happy; he should resign
·
We have barely
begun with tariffs, only cars and steel
·
US Treasury
Secretary Bessent is doing a fantastic job
·
We're still
willing to talk
·
I go on TV and
rile the market
·
The market has
become calm and nice because of the US Treasury Secretary Bessent
·
We're doing so
well, we blow through interest rates
·
Powell doesn't
know what he's doing
·
The tariffs are
kicking in, and the economy is strong
·
I don't want to
call Putin an assassin, but he's a tough guy
·
I spoke with
Germany, most of the larger countries
·
I spoke with
Germany, and they are enthusiastic
·
Having a strong
Europe is a very good thing
·
Europe is coming
over; they'd like to talk
·
Always open to
talking, including Europe
·
Will be talking
to people. The tariff letters are the deals
·
Patriot missiles
will go to Ukraine via NATO
·
Trump on Russia
negotiations: It just keeps going on and on
·
100% on Russia
would be the same as 500%. 500% on Russia is meaningless after a while
·
We can do a ‘secondary’
of 100% on Russia without the Senate
·
Republicans are
moving strongly in the Senate on tariffs
·
50 days for a deal
is a very short period. Secondary tariffs are very powerful
·
Billions of
military equipment will go to NATO from the US
·
Trump on Russia:
Secondary tariffs would be biting
·
Trade is great
for settling wars
·
We will make
top-of-the-line weapons for NATO
·
We will be
sending ‘the best' to NATO
·
We made a deal
today to send weapons to Ukraine
·
I'm unhappy with
Russia. Severe tariffs on Russia if no deal in 50 days
Trump also
made a military trade deal with NATO (the EU and Canada have now to pay for
Ukraine's aid):
The United
States of America has been ripped off on TRADE (and MILITARY!), by friend and
foe alike, for DECADES. It has come at a cost of TRILLIONS OF DOLLARS, and it
is just not sustainable any longer - And never was! Countries should sit back
and say, “Thank you for the many years’ long free ride, but we know you now
have to do what’s right for America.” We should respond by saying, “Thank you
for understanding the situation we are in. Greatly appreciated!”
Market
impact
Wall Street futures recovered from deep red early
in the EU session to slight green by the US closing session as the market is
confident that Trump will make a trade deal with the EU for a minimum 10%
tariff. Also, fine prints of Trump’s August tariffs may indicate around 7%
lower rate on a weighted average basis from April tariffs levels. Also, the panic about Fed Chair Powell’s
imminent resignation may have been suppressed as Powell ordered Fed inspectors
to review the controversial $2.5B HQ renovation project. And Fed’s Hammack
downplayed any political and economic pressure on the Fed to cut rates
immediately, which eased Fed credibility issues, helping USD to move higher and
Gold lower. Oil slid as Iran may not block the Strait of Hormuz immediately,
but may be toying with the idea as a negotiation tool with the US/EU.
Weekly Technical
outlook: DJ-30, NQ-100, SPX-500 and Gold
Looking
ahead, whatever may be the narrative, technically Dow Future (CMP: 44800) now has to sustain over 45000 for a
further rally towards 45300*/45800* and only sustaining above 45800, may
further rally to 46100/46500-47100/47200 in the coming days; otherwise
sustaining below 44950, DJ-30 may again fall to 44200/43900-43400/42400 and
41700/41200-40700/39900 in the coming days.
Similarly,
NQ-100 Future (23000) now has
to sustain over 23100 for a further rally to 23300*/23600-23800/24000 and
24100/24450-24700/25000 in the coming days; otherwise, sustaining below 22900,
NQ-100 may again fall to 2400/22200-21900/20900-20700/20200 and
19890/18300-17400/16400in the coming days.
Looking
ahead, whatever may be the fundamental narrative, technically SPX-500 (CMP: 6300) now has to sustain over 6450 for a
further rally to 6525/7000-7500/8300 in the coming days; otherwise, sustaining
below 6375/6300-6250/6200, SPX-500may again fall to 6000/5800-5600/5300 in the
coming days.
Technically
Gold (CMP: 3350) has to sustain over 3375-3395 for a
further rally to 3405/3425*-3450/3505*, and even 3525/3555 in the coming days;
otherwise sustaining below 3365-3360, Gold may again fall to 3340/3320-3300*/3280
and 3255*/3225*-3200/3165* and further to
3130/3115*-3075/3015-2990/2975-2960*/2900* and 2800/2750 in the coming days.
Disclaimer: I
am an NSE-certified Level-2 market professional (Financial Analyst-Fundamental+Technical)
and not a SEBI/SEC-registered investment advisor. The article is purely
educational and not a proxy for any trading/investment signal/advice. I am a professional analyst, signal provider,
and content writer with over ten years of experience. All views expressed in
the blog are strictly personal & independent and may or may not match with
any organization with, I may be associated.
If you want
to support independent & professional market analytics, you may contribute
to my PayPal A/C: asisjpg@gmail.com
For any professional
consultation about the financial market (EQ/COMM/FX), investment, trading
ideas, and real-time, professional-grade perfect signals, please DM:
ashishghoshjpg@gmail.com or ping me at Telegram id: asisjpg
