NAB Morning Call Tariffs are back. How hard will Trump go?
Trump's Tariffs Letters Approach
- Donald Trump plans to send letters to US trading partners detailing tariff rates, possibly reinstating high tariffs from Liberation Day.
- The deadline for these tariffs to apply is August 1st, allowing a negotiation window, but causing market uncertainty.
Trump's Tariff Letters Spark Major Market Uncertainty Ahead of August Deadline
The U.S. administration, led by Donald Trump, is sending letters this week to trading partners specifying the tariffs that will be applied if no deals are struck by the July 9 deadline. These tariffs could revert to the high rates announced on Liberation Day, with Trump even suggesting a possible increase to 30-35% for Japan. While the tariffs won't take effect until August 1, this move injects significant uncertainty into global markets as negotiations continue.
Scott Bessent noted efforts to secure deals with 18 nations, but for key regions like the EU and Japan, base tariffs could still be substantial, accompanied by hefty sectoral tariffs such as 50% on steel and 25% on autos. Ray Attrill highlighted that if tariffs exceed 20% baseline rates, there could be a notable downgrade in global growth expectations, with increased volatility likely in currency and equity markets. The situation remains fluid with potential for both deals and tough stances looming as the August 1 application date approaches.
OPEC+ Strategic Oil Output Increase
- OPEC+ plans to increase oil output substantially to capture more market share amid global economic optimism.
- This move can pressure US shale drilling by potentially lowering oil prices below profitability.