Despite President Donald Trump’s renewed push for sweeping tariffs, global markets appear unfazed.
Trump issued letters to 14 countries – including Japan, South Korea, and Malaysia—outlining new import levies ranging from 25% to 40%, set to take effect on 1st August 2025. More letters then followed.
Yet, major indices like the FTSE 100 and Nikkei 225 barely flinched, with some even posting modest gains.
So, who’s right—the president or the markets?
Trump insists tariffs are essential to redress trade imbalances and bring manufacturing back to the U.S. The EU also faces higher tariffs.
He’s floated extreme measures, including a 200% tariff on pharmaceuticals and a 50% levy on copper.
His administration argues these moves will strengthen domestic industry and reduce reliance on foreign supply chains.
However, investors seem to be betting on a familiar pattern: Trump talks tough but ultimately softens under pressure. Analysts have dubbed this the ‘TACO’ trade—Trump Always Chickens Out.
His own comments have added to the ambiguity, calling the August deadline ‘firm, but not 100% firm’.
The economic logic behind the tariffs is being questioned. Tariffs are paid by importers—often U.S. businesses and consumers—not foreign governments.
This could lead to higher prices and inflation, especially in sectors like healthcare and electronics. Some economists warn of recessionary risks for countries like Japan and South Korea.
In short, markets may be right to remain calm—for now. But if Trump follows through, the impact could be far-reaching.
With trade negotiations still in flux and only two deals (UK and Vietnam) finalised, the next few weeks will be critical. Investors may be wise not to ignore the warning signs entirely.
Whether this is brinkmanship or a genuine shift in trade policy, the stakes are high—and the clock is ticking.