The markets just don’t believe Trump in tariffs

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Good morning The Tesla share fell by almost 7 percent yesterday after Elon Musk announced at the weekend to found a new political party in the United States. The automobile manufacturers’ investors have shown very clearly that they are fed up with the billionaire’s political poems. Musk either doesn’t care or just can’t stay away. E -mail to us psychological theories: unedled@ft.com.

Ninety deals in 90, without waiting, 113 days, and this time I have it seriously

The deadline for absolutely no surprise was not a deadline at all. The federal states should negotiate a trade agreement with the USA until tomorrow or face each other mutual Tariff On a level that is already detailed in April on this famous poster board. Now the big day has been withdrawn to August for the first time. Or it could be: Finance Minister Scott Bessent, whose main task is that they transform the statements into politics, often mentions September 1st. Like the President himself, the deadlines of the government must be taken seriously, but not literally. “Seriously”, because if Trump should decide to enforce a deadline, the effects could be seismic. “Not literally” because he probably won’t do it.

What will the next three and a half weeks (and probably more) look like? We got a taste today when the president announced that Japan and South Korea would have 25 percent tariffs from the first of the month, subject to change “depending on our relationship with your country”. That sounds scary. The couple is the largest trading partner in the United States to Canada, Mexico and the EU. They made up almost 9 percent of US imports and 7 percent of US exports in 2024.

But the market instead of panic, gave the equivalent of a depressive shrug. The S&P 500, already in a declining pattern, when the announcement entered, fell another fifth of one percent. The dollar intensified by 0.7 percent compared to the Korean and one percent compared to the Yen. In Tokyo and Seoul, the shares opened in an upswing: the Korean Kospi index rose by over 1.4 percent in the first two hours, while the Japanese Nikkei retained 225 index by 0.4 percent. The modest movements are completely rational. On the one hand, the new interest rates would not increase the effective tariff rate in both countries. Paul Ashworth from Capital Economics explained to customers in a note that the new prices

Do not apply for goods that are subject to Trump’s product -specific tariffs, with cars 34 percent of imports from both countries that are already subject to a tax of 25 percent, which Trump has more than once threatened with an increase of 50 percent. Add the excluded electronics and pharmaceuticals and. . . If Trump takes through his threat, the overall effective tariff rate for US imports would increase from 15.5 percent to 16.6 percent.

And why should the markets panicked at this time about a pronunciation of administrations? Even the agreements that have been made seem to be wide open for further negotiations. As Liz Ann von Charles Schwab expressed it for the most part, they are “framework conditions, no trade agreements”. In the past, the trade agreements took 18 months to sign bilaterally, and another 40 to 45 months to implement. The exports of rare earth with China was really only a de-escalation-the Trump government has not published any details of the agreement, and China still holds US companies back, according to the Wall Street Journal.

The China negotiations are admittedly a special case. The business with Great Britain and Vietnam could tell us more about what other countries can hope for. But again that US AK agreement was just a frame. It lowered the taxes for British automobile manufacturers and freed air and space products from tariffs to import more beef, ethanol and industrial imports. Our colleague Alan Beattie Deflated it as follows:

Politically, you can see why a relatively small open economy with military and security dependencies in the United States would take a chance of a legally non -binding agreement and divide some small bioethanol quotas for the protection of its niche but politically high -standing steel porters.

However, there is a signal in the agreement. The United States had a trade surplus with Great Britain last year, and the agreement did not remove the 10 percent universal tariff. Other countries should therefore expect the soil to be less than 10 percent.

The most recent agreement with Vietnam is what we have for a “proper” deal: a direct tariff of 20 percent on Vietnamese exports, no duties for US exports and an interest rate of 40 percent for transition goods that aim against China. The restriction is that the Vietnamese economy is very different from that of South Korea and Japan. It is smaller and poorer and in the last year only $ 13 billion imported from US goods. In contrast, South Korea and Japan are richer and have a larger proportion of US exports. The sum for each country alone is more than five times as high as Vietnam. This and the important US military alliances with every country give these countries a stronger negotiating position.

In short, the tariff game is still – somehow – in its preliminary rounds. It starts seriously when agreements are made with large trading partners that the market believes that they will remain. The market reacts to these agreements; And the president reacts to the answer of the market. It has long been the thesis of this newsletter that Trump will return from tariffs that cause a continuing negative reaction of the markets. Only when the markets were convinced that a certain deal should hold on can they force the problem with it. We stay far from there.

The US shares and bond markets seem to have come to the conclusion that moderate tariffs – 10 percent for all trading partners, a little more for China and some specific sectors – are not much of importance for economic growth or profits, or they are alleviated if they do. And they simply ignored Trump’s persistent threats to heavier tariffs. The big question is whether investors have set up a great disappointment as Trump – encouraged by the indifference of the markets and the resilience of the economy – suddenly shows determination.

Sonds by Charles Schwab wonders whether in addition to the Trump (also known as Taco -Trad) could also give a “Trump call”:

Since the market has succeeded so well since April 9, although the economic data and inflation data may not yet show the full effect of tariffs, but in no way implode. . . Is this the institution for the willingness of the government to continue to press things from a tariff perspective?

We believe that this is worthwhile.

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