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Tariff 'doom loop' hangs over global equities

Tariff 'doom loop' hangs over global equities

Reuters15-07-2025
ORLANDO, Florida, July 15 (Reuters) - The astonishing rebound in stocks since early April largely reflects investors' bet that U.S. President Donald Trump won't follow through on his tariff threats.
But the market's very resilience may encourage the president to push forward, which could be bad news for equities in both the U.S. and Europe.
Investors appear to believe that the April 2 "reciprocal" tariffs were mostly a tactic to bring countries to the negotiating table, and Washington's levies will end up being much lower than advertised. Tariffs may end up much higher than they were before Trump's second term began, but the situation will still be better than the worst-case scenarios initially priced in after Trump's so-called "Liberation Day".
Monday's equity moves were a case in point. Trump's threat on Saturday to impose 30% levies on imports from the European Union and Mexico - two of America's largest trading partners - was met with a collective market shrug. European and Mexican stocks dipped a bit, but Wall Street closed in the green and the Nasdaq hit a new high.
This follows threats in recent days to place a 50% tariff rate on goods imported from Brazil and a 35% levy on goods from Canada not covered under the USMCA agreement. Brazilian stocks have slipped 5%, but Canadian stocks have hit new peaks.
The question now is whether the line between complacency and the "TACO" trade - the bet that "Trump always chickens out" - is getting blurred.
The scale of the recovery since April 7 is truly eye-popping. It took the S&P 500 less than three months to move from the April bear market lows to a new all-time high, as Charlie Bilello, chief market strategist at Creative Planning, recently noted on X. This was the second-fastest recovery in the last 75 years, only bested by the bear market recovery in 1982 that took less than two months.
On a 12-month forward earnings basis, the S&P 500 index is now near its highest level in years and well above its long-term average. The tech sector, which has propelled the rally, has rarely been more expensive in the last quarter century either.
None of that means further gains cannot materialize, and one could argue that the valuations are justified if AI truly delivers the promised world-changing productivity gains.
Regardless, it is hard to argue that the rally since April is not rooted in the belief that tariffs will be significantly lower than the levels announced on Liberation Day.
If many countries' levies do end up around 10% like Britain's and the aggregate rate settles around 15%, then equity pricing might very well be reasonable. But if that's not the case, growth forecasts will likely have to be revised a lot lower.
"We stay overweight U.S. stocks, but don't rule out more sharp near-term market moves. Uncertainty on who will bear tariff costs means yet more dispersion in returns – and more opportunity to earn alpha, or above-benchmark returns," BlackRock Investment Institute analysts wrote on Monday.
One concern is that a loop is potentially being created, whereby Wall Street's resilience and strength in the face of heightened trade uncertainty actually emboldens Trump to double down on tariffs.
Most analysts still believe cooler heads will prevail, however. Trump's tolerance for equity and bond market stress, and therefore U.S. economic pain, appears "limited", according to Barclays.
But if markets have gotten too complacent and Trump does increase tariffs on EU goods to 30%, potential retaliation would risk a repeat of something similar to the post-Liberation Day selloff, sending European equities down by double digits, Barclays warns.
It may also be that when it comes to tariffs, investors are focusing so intently on China that not much else moves the dial. This may be short-sighted though.
China accounted for 13.4% of U.S. goods imports last year, the lowest in 20 years. In contrast, the U.S. imported $605.7 billion of goods from the European Union, or 18.6% of all imports and the most from any single jurisdiction.
As Trump sees it, Europe is "ripping off" America almost as much as China.
Bilateral U.S.-China trade last year totaled $582 billion, compared with bilateral U.S.-EU trade flows of $975 billion, U.S. Census data shows. America's $235.9 billion goods deficit with the EU was smaller than its $295.5 billion gaps with China, but that's still comfortably America's second-biggest trade deficit.
If Trump doesn't back down in his standoff with Europe, Wall Street might have to.
(The opinions expressed here are those of the author, a columnist for Reuters)
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Exclusive: Shippers ask to end contracts with Russian-backed refiner Nayara, sources say

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  • The Guardian

‘The war needs to end': Is the US right turning on Israel?

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Donald Trump increases his golf footprint in Scotland while world looks elsewhere
Donald Trump increases his golf footprint in Scotland while world looks elsewhere

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time9 minutes ago

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Even a cursory glance towards the scale of this year's Open Championship at Royal Portrush emphasised why ongoing and occasionally fevered chatter about Turnberry staging the world's oldest major is futile. Whether the Turnberry owner was Donald Trump or Donald Duck, its lack of adjacent infrastructure makes it unfit for the Open. The Ayrshire venue, lauded again by its owner Trump during a visit in recent days, is simply incapable of hosting the Open in its present form. This need not be an uncomfortable reality for the US president, who can secure at least a portion of the profile and kudos he desires for Turnberry – one of the world's most outstanding golf courses – from an alternative source. It would, in fact, now be a surprise if Turnberry does not appear on the Scottish Open's rota at some point soon. Mutual convenience is staring us all in the face if Trump can even temporarily accept a prize which sits in the shadow of the championship he has craved since buying Turnberry in 2014. The European Tour Group has proved adept at navigating choppy sporting waters. Or, perhaps, merely dealing with the same away from prying eyes. It was the DP World Tour, formerly European, which eased Saudi Arabia into the golf mainstream and it is the same tour which allows Jon Rahm and Tyrrell Hatton to pursue Ryder Cup ambitions while technically in dispute over fines issued for participation in LIV competitions. As eyes fix on Royal Porthcawl and the Women's Open this week, where Lottie Woad will look to continue her vertiginous rise, the Legends Tour – Europe's domain for senior citizens – will stop off at Trump Aberdeen. Only days later, the DP World Tour's Nexo Championship is to be contested at the same venue. The European Tour Group has continued its trick of hiding in plain sight by arranging these events with no backlash whatsoever. Not so much as a raised eyebrow; a scenario that will inevitably continue as the tournaments take place. Depending on one's viewpoint, this is either a tremendous example of public relations or an ominous sign that few people care about the European Tour Group's approach to business. This is not at all to suggest protest or hand-wringing is essential, rather that Trump has quietly and already increased his golfing footprint in a land far from home. The Scottish government has even contributed £180,000 of public money to the Nexo Championship. The stakes look set to be raised. Doonbeg, now Trump Ireland, is known to be under consideration to stage the Irish Open. Reports suggest that could happen as quickly as 2026. Doonbeg and the Irish Open looks a strong alliance; a stunning location which also boasts hotel accommodation. Ireland, like Scotland, should have links venues for its national open. Guy Kinnings, the European Tour Group's chief executive, attended a function in Trump's company in Aberdeenshire on Monday evening before being present for the opening of the president's New Course on the Menie Estate. As Trump cut the ribbon on the New Course, Kinnings was one of just four people standing behind him; two were the president's sons. The Scottish Open's present base at the Renaissance Club in East Lothian is convenient. Leading players can stay on or close to the venue. Renaissance's American owners want the Scottish Open to stay there in perpetuity. The tournament offers a form of seaside preparation immediately before the Open. Last month's edition, though, bore witness to audible grumbles from golfers about the nature of that test. It is impossible to shake the feeling that Scotland has too many exceptional, true links courses for this competition to remain at its current home. Chief among them? Turnberry. There may be a necessary break to Renaissance's run. The R&A will give the Open an overdue return to Muirfield at some point, meaning it would be logistically impossible to stage the previous week's Scottish equivalent at a course which is basically next door. A switch to the west coast would make perfect sense at that point. Any suggestion Turnberry would be banned from future Open duties by hosting the DP World Tour is undermined by the fact professionals and amateurs crash around St Andrews and Carnoustie every year at the Dunhill Links Championship. Turnberry could not only handle a Scottish Open but would be a celebrated venue. 'We love Scotland,' Trump announced before boarding Air Force One on Tuesday. Get ready for a lot more of the same.

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