
Trading Day: Tariff cloud reappears over sunny Wall Street
Making sense of the forces driving global markets
By Jamie McGeever, Markets Columnist
I'd love to hear from you, so please reach out to me with comments at jamie.mcgeever@thomsonreuters.com, opens new tab. You can also follow me at @ReutersJamie and @reutersjamie.bsky.social.
The S&P 500 and Nasdaq touched new highs on Friday before cooling off following a report that U.S. President Donald Trump is pushing for a minimum 15-20% tariff on goods from Europe.
But Wall Street and most global benchmark indices rose on the week, as upbeat U.S. economic data more than compensated for the heightened trade uncertainty and Trump ramping up his verbal attacks on Fed Chair Jerome Powell.
This Week's Key Market Moves
Yet another choppy and event-filled trading week ended on a more subdued note on Friday, with trade and the Trump administration's hefty tariffs on major trading partners again at the forefront of investors' minds.
Trump's call for a minimum 15-20% tariff on imports from the European Union, as reported by the Financial Times, is a reminder that global trade tensions are still alive and could yet hit growth and fuel inflation.
Elsewhere in the global trade war, Trump's deepening spat with Brazil will be worth monitoring next week, while Treasury Secretary Scott Bessent is in Japan this weekend.
Economists at ratings agency Fitch on Friday raised their projected effective U.S. tariff rate to 19.4% from 14.1%. There's still a great deal of uncertainty over who will end up eating the tariffs, but levies of that magnitude will not be cost-free.
As well as trade, investors' focus next week will turn to U.S. corporate earnings, with more than a fifth of the S&P 500 companies reporting, and the European Central Bank's policy decision.
Chart of the Week
Following Friday's latest Japanese inflation data and ahead of Sunday's potentially crucial upper house election, it's worth reminding ourselves of how much of an outlier Japanese interest rates are in real terms.
The Bank of Japan's inflation-adjusted policy rate is almost -3%. The BOJ wants to continue raising rates, but it's not so simple.
Sunday's election could pave the way for a wave of public spending and tax cuts, putting the developed world's worst public finances under even more strain and weakening the yen further.
Yet long bond yields are already the highest on record. Raising rates and driving bond yields even higher could have a negative impact on growth. Maybe a very serious impact.
Policymakers are in a bind.
Here are some of the best things I read this week:
What could move markets on Monday?
Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, opens new tab, is committed to integrity, independence, and freedom from bias.
Trading Day is also sent by email every weekday morning. Think your friend or colleague should know about us? Forward this newsletter to them. They can also sign up here.
Hashtags

Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles


The Independent
28 minutes ago
- The Independent
Trump administration is reportedly looking to cut language services at the IRS
Reports suggest the Trump administration is considering eliminating language services at the Internal Revenue Service (IRS). This potential move follows Donald Trump 's executive order declaring English the official language of the United States. Attorney General Pam Bondi issued a memo directing federal agencies, including the Treasury Department, to plan for phasing out 'unnecessary multilingual offerings.' The IRS currently provides extensive language support, such as translated forms, free phone and in-person translation, and multilingual digital platforms. The proposed changes could significantly impede non-English speaking individuals from fulfilling their tax obligations, particularly amidst concerns about IRS cooperation with immigration enforcement.


Reuters
28 minutes ago
- Reuters
Dip in Asian currencies, outflows likely to keep up pressure on rupee
MUMBAI, July 25 (Reuters) - The Indian rupee is expected to open weaker on Friday and trade with a modest depreciation bias amid a dip in its regional peers and lingering pressure from portfolio outflows as investors gird for an upcoming news-heavy week. The 1-month non-deliverable forward indicated the rupee will open around 86.48-86.50 versus the U.S. dollar, compared with 86.4050 in the previous session. Asian currencies were down between 0.1% and 0.3%, while the dollar index ticked up to 97.5, as investors braced for U.S. President Donald Trump's tariff deadline, a Federal Reserve policy decision, and key U.S. economic data releases, all due next week. The rupee is expected to trade with a slight downward bias and could test support near 86.70-86.80 in the near term, a trader at a state-run bank said. While there is "nascent" interbank interest in taking long bets on the rupee, that is largely on the back of the market expecting some positive announcement on U.S.-India trade negotiations, the trader added. While optimism about U.S. trade deals with China and the European Union has picked up after an agreement with Japan, the prospects of a deal for India ahead of the August 1 deadline have dimmed. Britain and India signed a free trade agreement on Thursday, with India's trade minister saying that he remains confident of concluding a trade deal with the U.S. while downplaying the significance of the looming deadline. "Beyond tariffs and the rush to close the art of the deal, one continuing theme that we see in Asia and many countries outside the U.S. is the acceleration in moves to diversify away from or at least hedge with the U.S.," MUFG said in a note. In addition to the wait for a trade agreement with the U.S., foreign portfolio outflows have been a pain point for the rupee with overseas investors pulling out about $500 million from local stocks over July so far. KEY INDICATORS: ** One-month non-deliverable rupee forward at 86.60; onshore one-month forward premium at 12.50 paisa ** Dollar index up 0.1% at 97.58 ** Brent crude futures up 0.5% at $69.5 per barrel ** Ten-year U.S. note yield at 4.4% ** As per NSDL data, foreign investors sold a net $382mln worth of Indian shares on July 23 ** NSDL data shows foreign investors sold a net $41.7mln worth of Indian bonds on July 23


Reuters
28 minutes ago
- Reuters
Gold subdued as trade optimism weighs, but soft dollar cap losses
July 25 (Reuters) - Gold prices edged lower on Friday, as signs of progress in trade negotiations between the U.S. and its trading partners weighed on safe-haven demand, although an overall weaker dollar limited losses for bullion. Spot gold was down 0.1% at $3,363.91 per ounce, as of 0243 GMT. However, bullion has gained 0.4% so far this week. U.S. gold futures fell 0.2% to $3,365.50. "Basically we are seeing some profit-taking from short-term bullish speculators due to the fact that we now start to see this trade-deal optimism in the market," OANDA senior market analyst Kelvin Wong said. "However, the dollar is in a weakening bias and on top of that, we still have the Fed rate cuts pretty much alive at this juncture, which are supporting gold near $3,360 level." The European Union and the United States now appear to be heading towards a possible trade deal, according to EU diplomats, which would result in a broad 15% tariff on EU goods imported into the U.S., mirroring a framework agreement Washington struck with Japan. The S&P 500 and the Nasdaq notched record closing highs overnight as signs of easing global trade tensions lifted risk sentiment among investors. Offering respite to gold, the U.S. dollar index (.DXY), opens new tab was headed for its worst week in a month, making greenback-priced gold less expensive for other currency holders. Data showed U.S. jobless claims unexpectedly fell last week, signalling a steady labour market despite sluggish hiring making it harder for the unemployed to find work. The Federal Reserve is also widely expected to leave rates unchanged at its July 29–30 meeting, but markets continue to price in a potential rate cut in September. Spot silver rose 0.2% at $39.14 per ounce and was on track for a weekly gain, up 2.5% for the week. Platinum eased 0.2% to $1,407.10 and palladium climbed 0.9% to $1,238.73.