Tariff suspension under Trump's "reciprocal" policy nears expiration, potentially stirring up uncertainty.
The global economy and US stock market are holding their breath as the 90-day tariff deadline set by President Donald Trump approaches. Originally scheduled to expire on July 8, 2025, the tariff pause has significant implications for global trade relations and financial markets.
**Global Economic Impact**
The potential escalation of tariffs has created substantial uncertainty in global trade relations. The initial announcement of tariff increases led to a global market crash, with sharp declines in US stock indices and increased bond market volatility. The pause, designed to provide time for tailored negotiations with various countries, helped stabilize markets temporarily.
As the deadline approached, countries were under pressure to finalize trade deals to avoid tariff increases. However, only one deal was completed (with Britain), while others remained in negotiation, with some possibility of extension for countries negotiating in good faith.
The ongoing uncertainty and threat of renewed tariffs continue to pressure export-reliant economies, particularly in Asia (e.g., Japan and South Korea), as investors anticipate potential disruptions if tariffs are reinstated or increased after July 9. The tariffs could reshape global commerce by forcing companies to adjust supply chains, potentially leading to reshoring of manufacturing to the US, affecting global trade patterns and economic dynamics.
**US Stock Market Impact**
The initial tariff announcements led to significant stock market declines, including a nearly 5% drop in the S&P 500 and the largest point loss in Nasdaq history. The announcement of the 90-day pause triggered a sharp rebound, with the S&P 500 gaining over 9.5% in a single day, reflecting relief among investors and hopes for constructive trade negotiations.
As the July 9 deadline approached without comprehensive deals, US stock futures and other global markets witnessed cautious declines, reflecting investor concerns over the potential for tariffs to increase sharply again. The possibility of extending the 90-day pause could help alleviate some market anxiety, though investors remain wary due to the ongoing risk of tariff escalation if negotiations fail.
Ulrike Hoffmann-Burchardi, global head of equities at UBS Global Wealth Management, views the US-Vietnam accord as a positive step toward more durable bilateral deals for the US and greater clarity for investors. The deal, which sets minimum tariffs of 20% on Vietnamese goods, is a relief compared to the initial rates announced in April, which could have risen to a minimum of 46%.
In conclusion, the 90-day tariff deadline poses a significant risk of renewed trade tensions that could disrupt global trade and unsettle markets. While the initial pause provided temporary relief and a boost to the US stock market, uncertainty around the deadline and the pace of trade deal negotiations continue to fuel volatility in both global economic activity and stock prices. The outcomes will largely depend on whether the pause is extended and if substantive agreements are reached with key trading partners.
- The tariff deadline poses a considerable risk to export-reliant economies, particularly industries in Asia like Japan and South Korea, as investors anticipate potential disruptions if tariffs are reinstated or increased.
- The potential resolution of trade disputes, such as the US-Vietnam agreement, may provide some relief to investors and offer greater clarity for the business sector, as it sets minimum tariffs lower than previously proposed.
- Investors remain wary as they weigh the potential impact of tariff escalation on stock prices and global economic activity, with the outcomes being largely dependent on whether the tariff pause is extended and substantial agreements are reached with key trading partners.
