NAB Morning Call Zen and the Art of Trade Realignment
How Trump's Tariffs Shake Up Global Trade But Markets Stay Calm
The Trump administration announced a new wave of tariffs hitting countries like Japan, South Korea, and South Africa with rates around 25%-30%, matching their previous Liberation Day tariffs.
Markets reacted mildly despite the tariff news, partly because the implementation has been pushed back to August 1, giving room for negotiations and uncertainty.
The tariffs focus on countries with large US trade deficits, and there's an additional 10% tariff threat for countries aligned with anti-American policies, specifically the BRICS nations.
Japan and South Korea, major US trading partners, face tough adjustments, but the market expects tariffs around 20%-25% as a new baseline rather than steeper increases.
This evolving tariff landscape is likely to cause increased market volatility as negotiations and details unfold before the August 1 deadline.
Mild Market Response to Tariffs
- The US is imposing tariffs close to previously established Liberation Day rates with extensions delaying enforcement to August 1.
- Market reactions remain mild as investors anticipate further negotiations and clarifications before implementation.
Tariff Rates Linked to Trade Surpluses
- Countries with US trade surpluses like Australia likely retain a 10% tariff, while others face closer to 20% baseline tariffs.
- This framework helps anticipate future tariff impacts and trade adjustments.