Investors celebrate trade deals inking higher tariffs
Why it matters: While investors cheer the short-term clarity, they could be underestimating the long-term drag of higher tariffs on corporate earnings.
Driving the news: The 15% tariff on E.U. goods comes alongside a 0% tariff rate on American exports to Europe.
The deal also includes pledges from the E.U. to buy over $750 billion in U.S. energy, invest $600 billion more in the U.S. economy, and open markets to American manufacturers and defense firms.
Meanwhile, Commerce Secretary Howard Lutnick said tariff deadlines more broadly are firm, which means they will go into effect August 1.
Zoom in: The euro rallied against the dollar in response to the trade deal news, and risk assets such as bitcoin rallied as well.
Safe-haven assets like gold and the dollar were under pressure.
What they're saying: "The biggest piece in the trade deal puzzle still remains, and the Chinese are unlikely to be as willing to fold," Jamie Cox, a managing partner at Harris Financial Group, wrote in a note.
China is now the biggest focus for investors, as Axios Markets reported.
Public companies rely on China for access to lower priced goods and labor.
Chinese consumers also prop up U.S. companies, with 7% of the S&P 500's annual revenue coming from China, according to Apollo chief economist Torsten Slok.
Be smart: While tariff rates on China are the biggest country-specific tariff risk for investors, sector-specific levies are also of concern.
Lutnick said sector tariffs would become clear over roughly the next two weeks. Any clarity on sector tariffs could move stocks in those baskets.
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