Bloomberg Daybreak: Asia Edition Trump Issues New Tariff Rates and Trade Deal Deadline
Tariffs Cause Short-Term Uncertainty
- The new U.S. tariffs increase short-term uncertainty but likely won't change the longer-term outcome significantly.
- Tariffs will probably settle between 10% and 15% effective rate, which markets can digest.
U.S. Tariffs Cause Short-Term Market Uncertainty but Long-Term Stability Expected
President Trump announced new 25% tariffs on goods from Japan and South Korea, along with higher tariffs on Thailand and Cambodia, effective August 1st.
Despite these tariff announcements creating near-term uncertainty, the market's reaction suggests confidence that effective tariff rates will settle between 10% and 15%, which is manageable for investors.
Ahmed Riesgo, CIO at Insigneo, believes this move is part of Trump's typical negotiating style and that deals will eventually be struck to avoid severe market downturns.
Riesgo also highlights that although tariffs add some fiscal revenues, they are likely to remain sticky and persist beyond Trump's term.
Overall, market participants expect deals to be reached, maintaining moderate tariff levels and leading to a continuing but cautious equity market rally.
Fed Likely to Cut Rates
- Inflation is low and monetary policy is quite restrictive at present.
- This supports the rationale for the Fed to cut rates at least two or three times later.