Financial markets are “probably right” to ignore a flurry of tariff-related headlines from U.S. President Donald Trump this week, according to analysts at Capital Economics.
Trump has sent a slew of letters to different countries, including major suppliers Japan and South Korea, detailing the higher tariff rates they face should they not reach a trade deal with the United States.
He also extended the deadline for the heightened levies to take effect to August 1. They were previously slated to kick in today.
Still, Trump insisted at a cabinet meeting on Tuesday that the new deadline will not be pushed back any further, even after stating earlier this week that it was “not 100% firm.” He added that negotiations are going well with the European Union and China, but flagged that the EU may be days away from receiving its own tariff letter.
Investors had a widely muted response to the most recent salvo in Trump’s aggressive tariff agenda. The main averages on Wall Street ended trading on Tuesday in mixed fashion, while option-implied volatilities hover around their lowest levels since April.
“Market participants have largely shrugged off President Trump’s latest set of threats to raise tariffs on a range of countries, focusing on the fact that today’s ’deadline’ for re-imposing the ’reciprocal tariffs’ from 2nd April has, as widely expected, been extended,” said the Capital Economics analysts led by Jonas Goltermann said in a note.
