Markets Face Intense Pressure Prior to Tariff Decision Due on Wednesday
In a move aimed at addressing the U.S. trade deficit, President Donald J. Trump has announced new tariff rates as part of his ongoing enforcement of reciprocal tariffs. These tariffs, set to take effect on August 1, 2025, will affect various countries, with tariff rates varying by country.
The new tariffs range mostly between 25% and 40%, depending on the bilateral trade relationships. Countries such as Japan, South Korea, South Africa, Kazakhstan, Laos, Malaysia, Myanmar, Tunisia, Bosnia and Herzegovina, Indonesia, Bangladesh, Serbia, Cambodia, and Thailand will be subject to these new tariffs.
The initial announcement of these tariffs in April caused significant volatility in the global stock market, with major indexes experiencing a $3.1 trillion loss in value the day after the tariffs were announced. However, a 90-day suspension of country-specific tariffs followed, resulting in one of the largest single-day market increases. Since then, markets have climbed to record highs, demonstrating resilience amid tariff uncertainties.
With the expiration of the tariff suspension, the threat of tariff reinstatements has caused market unease. Some countries have agreed or offered to reduce their tariff rates and eliminate barriers, which has helped ease tensions.
In the world of stocks, CrowdStrike Holdings (CRWD) is down more than -1% after Piper Sandler downgraded the stock to neutral. Webull (BULL) is down more than -11% after securing a standby equity purchase agreement. Travelers Cos (TRV) is down more than -1% after Barclays downgraded the stock to equal weight. Geo Group (GEO) and CoreCivic (CXW) are up more than +2% due to the approval of President Trump's tax and spending bill providing billions of dollars for immigrant detention centres. Public Service Enterprise Group (PEG) is up more than +1% after UBS upgraded the stock to buy. Tractor Supply Co (TSCO) is up more than +3% after reporting a +4.3% increase in sales in the fiscal quarter ended June 28.
Meanwhile, Phibro Animal Health Corp (PAHC) is up more than +8% after JPMorgan Chase upgraded the stock to overweight. GE Vernova (GEV) is up more than +1% after UBS initiated coverage of the stock with a recommendation of buy. MGM Resorts International (MGM) is down more than -1% after Goldman Sachs initiated coverage on the stock with a recommendation of sell.
In the tech sector, Chip stocks are under pressure today, with Marvell Technology (MRVL) and ARM Holdings Plc (ARM) down more than -3%, Advanced Micro Devices (AMD) down more than -2%, and Intel (INTC), GlobalFoundries (GFS), KLA Corp (KLAC), and ON Semiconductor Corp (ON) down more than -1%.
The S&P 500 Index, Dow Jones Industrials Index, and Nasdaq 100 Index are all down today, with Tesla (TSLA) leading losses due to CEO Musk announcing the formation of a new political party and receiving backlash from President Trump.
In economic news, the consensus for Q2 earnings of S&P 500 companies is for a rise of +2.8% year-over-year, the smallest increase in two years. Eurozone May retail sales fell -0.7% m/m, the biggest decrease in 1.75 years. German May industrial production unexpectedly rose +1.2% m/m.
Federal funds futures prices are discounting the chances at 5% for a -25 bp rate cut at the July 29-30 FOMC meeting. Swaps are discounting the chances at 6% for a -25 bp rate cut by the ECB at the July 24 policy meeting. September E-mini S&P futures and September E-mini Nasdaq futures are also down today.
President Trump has pledged to announce unilateral tariff rates on dozens of countries in the coming days. He has also indicated that countries aligning with the anti-American policies of the BRICS group of nations will face an additional 10% tariff. The fiscal stimulus from the recently signed reconciliation bill is expected to be a net positive for the US economy, but the higher deficit is negative as it increases the risk of an eventual debt crisis in the United States.
With these developments, the global stock market and economy continue to navigate the challenges presented by tariff policies and geopolitical tensions.
[1] Source: White House Office of the Press Secretary [2] Source: CNBC [3] Source: The Hill
The new tariffs announced by President Trump, affecting countries such as Japan, South Korea, and others, are set to impact the technology sector as well, with chip stocks experiencing a decline. [1]
In light of President Trump's pledge to impose unilateral tariffs on various countries, the global stock market and economy are bracing for potential increases in tariff rates, particularly for countries aligning with the anti-American policies of the BRICS group. [2]
