Wall Street is flying amid Trump chaos
They, however, sail serenely on. The S&P 500 is up more than 7 per cent this year, Nasdaq 8.6 per cent and the AI-driven bigger technology stocks, as a group, 15 per cent. Bond yields, at both the short and long ends of the yield curve, have fallen since the start of the year.
The apparent complacency of investors could be explained by the 'TACO' trade – a conviction that Trump Always Chickens Out – but that would suggest a lack of sophistication and awareness.
Wall Street is brushing off the effects of the Trump chaos. Credit: Bloomberg
Trump's tariffs are real.
His 10 per cent baseline tariffs are in place, as are his sectoral tariffs on steel, aluminium, copper, autos, auto parts, small packages, imports from China and some from Canada and Mexico.
Loading
His punitive 'reciprocal' tariffs are scheduled to go live on August 1. Whether or not they are as Draconian as those unveiled on April 2, they will exacerbate the existing effects of Trump's trade wars and lengthen the time it will take before the full effects of the tariffs are felt and can be assessed.
Trump's transparent attempts to force the Fed to cut US interest rates and his foreshadowing of the appointment of a Fed chair who will accede to his wishes are also very real.
Rather than chickening out, as he did when he deferred the introduction of the reciprocal tariffs he announced on April 2 after the markets shuddered, Trump now seems emboldened by the return of investor optimism.
Whether the market calm will survive when the reality of Trump's reciprocal tariffs hits home in 10 days' time or when he appoints his 'yes man' to be Powell's successor is the trillion-dollar (multi-trillion dollars?) question.
Investors ought to be concerned about Trump's tariffs because they are already having an impact on inflation and some corporate profits.
Loading
Last week's June inflation data, while apparently benign, did blip up to 2.7 per cent (the Fed's target is 2 per cent) and there were material increase in the prices of those goods most exposed to the tariffs already in place, even though importers had rushed to stockpile their imports to get ahead of the imposition of the tariffs.
Those indications of rising inflation can only strengthen as those inventories are run down and the cost pressures on US importers – who pay the tariffs – rise. Already retailers and others are talking about price rises to offset the tariffs' cost.
On Monday, Stellantis, the manufacturer of Chrysler, Jeep, Ram, Peugeot and Fiat vehicles, announced a €2.3 billion ($4.1 billion) first half loss.
It said the tariffs cost it €300 million after factory shutdowns had caused a 25 per cent reduction in deliveries of its cars to US buyers. It also wrote off another €300 million from the value of clean air credits that it held after Trump's One Big Beautiful Bill (the Republicans budget bill) removed the penalties for companies' failure to comply with clean air standards.
Trump has continued his attacks on Fed chair Jerome Powell. Credit: Bloomberg
General Motors, which also reports this week, has said the impact of Trump's tariffs will cost it about $US4.5 billion ($6.9 billion) this year. It imported nearly half the cars it sold last year from Mexico and South Korea.
So far, the tariffs haven't had a material impact on the price of cars – they actually fell in June – or the volumes sold. That may be because buyers acted to get in ahead of the tariffs, as they may have done in other categories. That would explain the reasonably healthy retail sales numbers.
As the impact of the tariffs gradually shows up in companies' costs as their inventories run down and their capacity to absorb those costs lessens, there will be price rises and increased inflation and, inevitably, a response from consumers.
There's also the impact of the One Big Beautiful Bill, which added a raft of new tax and spending measures to Trump's 2017 tax cuts for companies and the wealthy. The Congressional Budget Office's most recent update of the impact of that legislation is that it will add a net $US3.4 trillion to US government debt over the next decade.
Foreign investors, it seems, are more wary of the Trump trade and central bank agendas than the locals.
The bill is stimulatory at a time when inflation is just starting to accelerate.
In those circumstances, Trump's repeated demand for the Fed to cut its policy rate by 3 percentage points would look ludicrous and the market's would be starting to fear rising, not falling interest rates.
Any undermining of Powell before his term expires next May, or the appointment of someone obviously going to try to do Trump's bidding, would also see the US yield curve steepen.
The yields on short-term securities would fall in expectation of a lower federal funds rate (analogous to the Reserve Bank's cash rate), but the yields on longer-term bonds would rise to compensate for the likely higher inflation rates.
Loading
The mixture of Trump's tariffs and the politicisation of the Fed would probably impact both economic growth and the inflation rate.
With the S&P 500 trading at 27 times the earnings of its constituent companies last year and 22 times the bullish forecasts for this year's earnings, any significant rise in market interest rates would have a very material impact on share prices.
For the moment, because the data has yet to reflect anything other than the earliest impact of Trump's less impactful tariffs, the only dissonant note within the markets is being sounded by the market for the US dollar, which has lost more than 10 per cent of its value this year.
Foreign investors, it seems, are more wary of the Trump trade and central bank agendas than the locals.
The Market Recap newsletter is a wrap of the day's trading. Get it each weekday afternoon.
Hashtags

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


7NEWS
26 minutes ago
- 7NEWS
Australia lifts ban on import of US beef
The Albanese Government has lifted a ban on United States beef, in a major move to appease the Trump Administration and to try and end tariffs on Australian exports. The US has had beef access into Australia since 2019. The announcement on Thursday will allow for expanded access to include beef sourced from cattle born in Canada or Mexico, which is legally imported and slaughtered in America. Albanese Government sources say in late 2024 and early 2025, the US introduced more robust movement controls, which means that all cattle from Canada and Mexico can be identified and traced to the farm and through the supply chain. Minister for Agriculture Julie Collins said the government has done all the necessary checks. 'The Albanese Labor government will never compromise on biosecurity,' she said. 'The US Beef Imports Review has undergone a rigorous science and risk-based assessment over the past decade. 'The Department of Agriculture, Fisheries and Forestry is satisfied the strengthened control measures put in place by the US effectively manage biosecurity risks. 'Australia stands for open and fair trade - our cattle industry has significantly benefited from this.' Nationals Senator Bridget McKenzie says the Opposition is waiting for a briefing from the government on the details of the announcement. But the Coalition is concerned protocols may have been watered down, risking disease entering Australia. 'We know this is because of the Prime Minister's inability to repair our relationship with the United States,' McKenzie said. 'Anthony Albanese must not sacrifice our beef industry and our farmers to repair the diplomatic deficiencies of his relationship with the United States.' Aussie beef has had back-to-back record-breaking export years, with last year worth $14 billion.


Perth Now
26 minutes ago
- Perth Now
Australia paves way for US beef as Trump tariffs loom
Australia has opened the door to more US beef imports by lifting biosecurity restrictions, as the government seeks ways to dampen the blow from Donald Trump's tariff regime. The federal government revealed the changes on Thursday while stressing that the decision follows a decade-long science-based review. "The Albanese Labor government will never compromise on biosecurity," Agriculture Minister Julie Collins said. "Australia stands for open and fair trade - our cattle industry has significantly benefited from this. "(The department) is satisfied the strengthened control measures put in place by the US effectively manage biosecurity risks." Although the US has been able to send beef to Australia since 2019, any beef raised in Canada or Mexico before being slaughtered and processed in the US was previously barred due to biosecurity concerns. One concern was that Mexico's livestock tracking system could inadvertently lead producers to import beef from parts of the continent where there were disease outbreaks. But the latest announcement will lift the ban on beef sourced from Canada or Mexico after the US introduced more robust movement controls in late 2024 and early 2025 allowing for improved identification and tracing throughout the supply chain. The change could be used as a bargaining chip as Australia continues to push for tariff exemptions from the US after the US president earlier this year demanded Canberra lift the beef import restrictions. Australia is the biggest exporter of beef to the US. According to Bendigo Bank's recent mid-year agriculture outlook, Aussie beef will continue to be on the menu in the US, where herd numbers are in decline due to drought and increased costs of agricultural inputs. Most Australian goods sent to the US currently face a 10 per cent tariff, while steel and aluminium products have been slapped with a 50 per cent tariff. Mr Trump has also threatened a tariff on pharmaceutical imports to the US, which is one of Australia's biggest exports to its ally. Although Prime Minister Anthony Albanese is yet to secure a face-to-face meeting with Mr Trump - after their first scheduled talks were scuppered by the conflict in the Middle East - Australia has largely avoided the brunt of the tariffs as most of its exports are only exposed to the baseline levy. But other aspects of the US-Australia relationship remain uncertain. The nuclear submarine deal between Australia, the US and the UK - under the AUKUS security alliance - could be in peril after the Pentagon launched a review to examine whether the agreement aligns with Mr Trump's "US first" agenda. However, Mr Albanese has confirmed Australia made another scheduled payment as part of the deal to acquire US nuclear submarines, taking the total paid to $1.6 billion so far. "It's about increasing ... their industrial capacity" to build the submarines, he told ABC television on Wednesday. Under the $368 billion program, Australia will buy at least three Virginia-class submarines from the US sometime in the early 2030s. A new class of nuclear submarines will be built in Adelaide to be delivered in the 2040s.

Sydney Morning Herald
an hour ago
- Sydney Morning Herald
Trump told in May that his name appears in Epstein files: report
Washington: US President Donald Trump is among many of Jeffrey Epstein's associates whose name appears in the 'Epstein files' – records from investigations of the financier's alleged sex-trafficking crimes – according to a US media report. The Murdoch-owned Wall Street Journal reported Attorney-General Pam Bondi and her deputy informed the president his name was in the documents during a meeting at the White House in May, citing officials familiar with the exchange. Trump was told many other high-profile figures were also named, according to the Journal 's story. The meeting was reportedly a routine briefing and Trump's appearance in the files was not the focus. Being named in the files is not necessarily an accusation of wrongdoing. Trump was friends with Epstein in the 1990s, and they mixed in the same New York social circles, before falling out in the 2000s, according to Trump. But the report of Trump's appearance in the documents will intensify speculation about why the administration has refused to release the files – something Trump indicated he would do – and fuel anger in the president's MAGA base. Loading In a statement to this masthead, White House communications director Steven Cheung did not explicitly deny The Wall Street Journal story, but said it was a continuation of 'fake news' stories aimed at attacking Trump. 'The fact is that the president kicked [Epstein] out of his club for being a creep,' Cheung said, referring to Trump's Mar-a-Lago club in Florida. 'This is nothing more than a continuation of the fake news stories concocted by the Democrats and the liberal media, just like the Obama Russia-gate scandal, which President Trump was right about.'