Market update: Tariff threats ramp up ahead of new August 1 deadline
July 2025, In the Loop
- Key Insights
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- The U.S. has threatened higher tariff levels against several countries and sectors, most likely as part of a negotiating strategy ahead of the new August 1 deadline for tariffs to take effect.
- Risk assets have largely shrugged off tariff concerns since they were first announced in April, with the wider economic backdrop remaining supportive.
- As earnings season commences, forward guidance from companies in targeted sectors should provide an indication about the impact of tariffs and any escalation.
Over the weekend, President Donald Trump ramped up tariff threats against a range of countries and sectors in a move likely aimed at expediting negotiations on trade deals as the new August 1 deadline draws closer. The threats were delivered via letters to several country leaders, including new 30% tariff rates on the European Union and Mexico and 35% on Canada, effective August 1.
The latest salvo of threats included a demand for Mexico to make more progress on tackling drug cartels and a threat to impose a 50% tariff on Brazilian imports to the U.S., partly in retaliation for Brazil’s prosecution of former President Jair Bolsanaro.
President Trump has also taken aim at individual sectors, including a 50% tariff threat on imported copper, which sent copper markets reeling last week.
What we think
President Trump seems to be losing patience with a lack of progress on trade deals and has shown that he is willing to ratchet up unilateral threats.
The new self-imposed August 1 deadline increases the risk that the president may hold to the new higher levies, given that he risks losing credibility if he continues to extend deadlines.
The president appears emboldened to push the limits on trade, bolstered by the passing of the “Big Beautiful Bill,” strong labor market data, record tariff revenue collection (see Figure 1), and equity markets near record highs.
Spike in U.S. customs revenues since “Liberation Day” tariff announcements
As of June 30, 2025.
Source: Bloomberg Finance L.P.
Risk assets have thus far looked through rising trade uncertainty since the so-called Liberation Day tariffs were announced. The economic backdrop has remained broadly supportive, corporate earnings have not yet reflected major tariff impacts, and tariffs have not begun to feed through to inflation reads.
Investment implications
- Equities: While equity markets have reached near‑record levels, they could be vulnerable should President Trump hold firm on implementing the new tariff levels on August 1. Markets may become more sensitive if little progress is made on trade deals over the next few weeks.
- Inflation and yields: Should the tariff rates take effect on August 1, the new higher levels could exacerbate inflationary concerns and push yields higher as the Fed remains sidelined.
- Earnings guidance: This week marks the start of second-quarter earnings season. Data will shed light on any impacts of current tariffs and how recent escalation, particularly among targeted sectors, weighs on forward guidance.
Toby M. Thompson, CFA®, CAIA®
Portfolio Manager
Does a geopolitical crisis equal a market crisis? Not necessarily.
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