Latest news with #TrumpAlwaysChickensOut
CNBC
6 hours ago
- Business
- CNBC
Market watchers warn Trump might not ‘chicken out' of 30% tariffs on the EU
Global investors may be underestimating U.S. President Donald Trump's commitment to follow through on his latest tariff threats, some market watchers have warned. In his latest trade policy update, Trump announced that he would be slapping 30% tariffs on goods imported to the U.S. from the European Union and Mexico from Aug. 1. European markets had a muted reaction to the news, with the pan-European Stoxx 600 index ending Monday's session — the first after Trump sent his letter to the EU — 0.06% lower. Tuesday's session saw a slightly deeper sell-off , with the index shedding 0.4%, but sentiment was largely dampened by economic growth concerns after U.S. inflation rose. Compared with the rout seen in the immediate aftermath of the so-called "liberation day" announcement earlier this year, this week's market moves mark a stark contrast in sentiment – even though the looming EU tariff rate is higher than the one drawn up back in April. On April 3 – the day after Trump unveiled his reciprocal tariffs list that included a 20% blanket rate on EU goods – the Stoxx 600 lost 2.7%. The subsequent two sessions saw the index plummet 5% and 4.5%, respectively. .STOXX YTD line Stoxx 600 price year-to-date Part of the reason for the less severe reaction from markets might be due to investors doubling down on the so-called TACO – Trump Always Chickens Out – trade , in which market participants are trading assets with a firm belief that the White House's tariff threats are merely a negotiating tactic that are unlikely to come to fruition. Indeed, there appears to be a strong belief among many that a deal between the EU and the U.S. will be struck before Trump's looming Aug. 1 deadline. "When it comes to the most recent tariff threats, investors just aren't getting worried," Michael Field, European market strategist, at Morningstar, told CNBC in an email on Wednesday. "Of course, you could put this down to complacency … but their experience of the last few months has shown that, so far, tariff threats have simply been a way of getting people to the negotiation table, and haven't yet translated into a working policy." Others, however, have warned that this approach could see some investors getting burned by the expectation of deals being reached. "I do believe these tariffs will ultimately be implemented. I don't think the EU is going to give in as easily as Trump might hope," Anthony Esposito, founder and CEO of Australian investment advisory AscalonVI Capital, told CNBC. "This scenario likely contributes to lower global GDP growth, and it's coming at a time when many of the EU's largest economies are burdened with historically high sovereign debt levels." European officials have expressed optimism that Washington and Brussels are edging closer to the framework of a trade agreement, but it has also been made clear that the EU is ready to retaliate with countermeasures if its economic interests are damaged by tariffs. Kevin Yin, VP of investment at Phoenix, Arizona-based Asterozoa Capital, argued that this time around, Trump has a greater incentive to follow through on his tariff threats. "The TACO (Trump Always Chickens Out) narrative has held so far, but now with domestic stock markets near all-time highs and largely complacent to continued tariff threats, Trump has additional leverage to continue his push which increases the chance of the 30% tariff rate coming to fruition," he said in an email. "On the other hand, Trump and [Treasury Secretary Scott] Bessent have shown more sensitivity to the bond market, and the recent rise in yields may pressure the President and his team to back off." Risk to Europe's stock rally European equities have been on a bull run this year, amid a broad diversification away from U.S. assets and the promise of vast fiscal stimulus in the region. The Stoxx 600 has gained more than 7% so far this year, while Germany's DAX index is up by around 21% and Italy's FTSE MIB has surged 17%. Market watchers told CNBC that a 30% tariff scenario threatened to derail – at least in part – the regional rally. "Could tariffs kill the European bull run? It really depends on the level," Morningstar's Field said. "[10%] tariffs, as is the case with the U.K., would be a mild hurdle – 30% tariffs on the other hand could put a serious dent in European GDP growth for the next few years. This might not be enough to quell entirely the flight to European equities, but it would certainly weaken the current momentum that Europe has." Dan Coatsworth, investment analyst at AJ Bell, agreed that if Trump follows through on his latest threat, it could hamper further growth in valuations in Europe. "Europe has been such a strong performer this year thanks to investors looking for cheaper valuations compared to the US and the prospect of greater spending by the German government on areas such as defence and construction," he told CNBC. "High tariffs threaten to spoil this party and could lead to a bout of profit taking by investors." Anthony Willis, senior economist at Columbia Threadneedle, took a more optimistic view. "It's worth remembering that EU exports to the US are around 18% to 20% of overall exports – that leaves a large amount of trade that will not be impacted by the actions of the Trump administration," he said. "Indeed, the consequences of the US imposing levies on everyone appears to be that many countries are looking elsewhere for trade opportunities." Trading amid uncertainty When it comes to trading amid the uncertainty, AscalonVI's Esposito warned that a 30% tariff scenario would see "most asset classes across the region … feel pressure." "However, if defense spending continues to rise , the European Central Bank continues to hold rates around 2%, and precious metals continue to rally, we could see relative outperformance in defense, financials, and mining," he said. "From a trading perspective, I would be long precious metals and cautious on European and US equities." Asterozoa's Yin added that if Trump's proposed tariffs are fully realized, he would expect to see U.S. Treasurys selling off, while gold and U.S. industrials rally. "European exporters such as auto [equipment manufacturers] could suffer," he told CNBC.
The Age
2 days ago
- Business
- The Age
Trump wants Europe to surrender to him
It will take years before their commitments to increase their own defence spending might wean them off their reliance on the US for protection from an aggressively expansionist Russia. However, with Trump also announcing at the weekend that he is considering raising the baseline tariff rate to 15 to 20 per cent, they have to take his threat of a 30 per cent tariff – and additional tariffs to match any retaliatory measures they might take – seriously. Trump appears impatient that he hasn't delivered the '90 deals in 90 days' the administration boasted it would deliver, let alone the 200 deals he once said were virtually done. He's also been boosted by the successful passage through Congress of his One Big Beautiful Bill Act and by the buoyancy of US financial markets, which have rebounded from their sell-offs in April, when Trump first unveiled his 'reciprocal' tariffs. In April, he deferred imposition of the tariffs until July (and subsequently deferred them again until next month) because the bond market was 'getting a little queasy.' Now markets have settled, with the sharemarket posting record highs. That may be because investors don't believe he will follow through with the reciprocal tariffs he has threatened – the 'Trump Always Chickens Out' or TACO trade – or because any ill effects from tariffs, most notably increased inflation, have yet to show up in economic data. Loading No one, including Trump himself, it seems, knows what he might post next on his Truth Social, so markets are behaving as if nothing has happened until something actually happens. August 1 – the new deadline for his reciprocal tariffs – could be a wake-up moment for markets. The apparent complacency in markets, in the meantime, is encouraging Trump to be more aggressive and more impatient. There is a risk that, rather than heed, as he has until now, the urgings of calmer voices in his cabinet to negotiate deals, he will follow his personal preference and unilaterally present trade partners with 'take it or leave it' ultimatums. While the EU still appears to believe that Trump's latest threat is a negotiating ploy, they have prepared countermeasures in case it isn't. The EU had drawn up a list of US exports that it could target in response to the baseline tariff and the sectoral tariffs on steel, aluminium and autos, covering about €21 billion ($37 billion) of US exports. Items on that list included chicken, motorcycles and clothing. It has another list, targeting another €72 billion of products, ranging from aircraft to alcohol, with which it could respond to Trump's reciprocal tariffs. It also has what it calls its 'anti-coercion instrument,' or actions that could hit the trade in services, although it is reluctant to deploy that instrument, which it devised in response to a deluge of cheap imports from China. The total trade between the US and EU is worth about $US1 trillion ($1.5 trillion), with the EU enjoying a trade surplus in goods of $US235 billion, but a trade deficit in services of about $US75 billion. The EU, in its negotiations with the US, had sought exemptions from Trump's tariffs for key sectors, such as aircraft and alcohol, in exchange for a promise to buy more US goods, particularly weapons and LNG, that would narrow the US goods trade deficit. Von der Leyen said on Saturday that the EU was ready to continue negotiating but prepared to consider retaliation. Imposing 30 per cent tariffs on EU exports would disrupt essential transatlantic supply chains, harming businesses and consumers on both sides of the Atlantic, she said. The dilemma for the EU is that Trump's view of its non-tariff policies and trade barriers includes its value-added tax and its regulation of digital activity to protect competition and consumers. No nation state – or, in the EU's case, collection of 27 nation states – would surrender its sovereignty and allow Trump to dictate its domestic policy settings. Having seen what Trump has done to Brazil, threatening a 50 per cent tariff rate in response to unfair trade barriers (even though the US has a trade surplus with Brazil) and its trial of former president Jair Bolsonaro – an enthusiastic Trump supporter – for allegedly plotting a coup, the EU would be conscious of the risk that Trump's demands may not be confined to its goods trade. The potential for a trade confrontation is, therefore, quite significant. The EU will have to decide whether it should roll over and accede to Trump's demands, damaging its industries and the sovereignty of its states. Alternatively, it could emulate China and allow the confrontation to escalate to the point where it threatens a trade embargo, which would, as China's tot-for-tat tariffs did, scare the bejesus out of financial market participants and unnerve the White House. Loading Trump's indiscriminate threats of trade sanctions against America's friends and foes alike have ignited a scramble by the EU and others to secure new markets. There is potential for a new trading bloc, spanning Europe, the non-Chinese Asia Pacific and Latin America, to emerge. Trump and much of his hand-picked cabinet are protectionists and isolationists. At the conclusion of his trade wars on everyone, if much of the rest of the world decides to trade freely among themselves, he might get what he wished for.
Sydney Morning Herald
2 days ago
- Business
- Sydney Morning Herald
Trump wants Europe to surrender to him
It will take years before their commitments to increase their own defence spending might wean them off their reliance on the US for protection from an aggressively expansionist Russia. However, with Trump also announcing at the weekend that he is considering raising the baseline tariff rate to 15 to 20 per cent, they have to take his threat of a 30 per cent tariff – and additional tariffs to match any retaliatory measures they might take – seriously. Trump appears impatient that he hasn't delivered the '90 deals in 90 days' the administration boasted it would deliver, let alone the 200 deals he once said were virtually done. He's also been boosted by the successful passage through Congress of his One Big Beautiful Bill Act and by the buoyancy of US financial markets, which have rebounded from their sell-offs in April, when Trump first unveiled his 'reciprocal' tariffs. In April, he deferred imposition of the tariffs until July (and subsequently deferred them again until next month) because the bond market was 'getting a little queasy.' Now markets have settled, with the sharemarket posting record highs. That may be because investors don't believe he will follow through with the reciprocal tariffs he has threatened – the 'Trump Always Chickens Out' or TACO trade – or because any ill effects from tariffs, most notably increased inflation, have yet to show up in economic data. Loading No one, including Trump himself, it seems, knows what he might post next on his Truth Social, so markets are behaving as if nothing has happened until something actually happens. August 1 – the new deadline for his reciprocal tariffs – could be a wake-up moment for markets. The apparent complacency in markets, in the meantime, is encouraging Trump to be more aggressive and more impatient. There is a risk that, rather than heed, as he has until now, the urgings of calmer voices in his cabinet to negotiate deals, he will follow his personal preference and unilaterally present trade partners with 'take it or leave it' ultimatums. While the EU still appears to believe that Trump's latest threat is a negotiating ploy, they have prepared countermeasures in case it isn't. The EU had drawn up a list of US exports that it could target in response to the baseline tariff and the sectoral tariffs on steel, aluminium and autos, covering about €21 billion ($37 billion) of US exports. Items on that list included chicken, motorcycles and clothing. It has another list, targeting another €72 billion of products, ranging from aircraft to alcohol, with which it could respond to Trump's reciprocal tariffs. It also has what it calls its 'anti-coercion instrument,' or actions that could hit the trade in services, although it is reluctant to deploy that instrument, which it devised in response to a deluge of cheap imports from China. The total trade between the US and EU is worth about $US1 trillion ($1.5 trillion), with the EU enjoying a trade surplus in goods of $US235 billion, but a trade deficit in services of about $US75 billion. The EU, in its negotiations with the US, had sought exemptions from Trump's tariffs for key sectors, such as aircraft and alcohol, in exchange for a promise to buy more US goods, particularly weapons and LNG, that would narrow the US goods trade deficit. Von der Leyen said on Saturday that the EU was ready to continue negotiating but prepared to consider retaliation. Imposing 30 per cent tariffs on EU exports would disrupt essential transatlantic supply chains, harming businesses and consumers on both sides of the Atlantic, she said. The dilemma for the EU is that Trump's view of its non-tariff policies and trade barriers includes its value-added tax and its regulation of digital activity to protect competition and consumers. No nation state – or, in the EU's case, collection of 27 nation states – would surrender its sovereignty and allow Trump to dictate its domestic policy settings. Having seen what Trump has done to Brazil, threatening a 50 per cent tariff rate in response to unfair trade barriers (even though the US has a trade surplus with Brazil) and its trial of former president Jair Bolsonaro – an enthusiastic Trump supporter – for allegedly plotting a coup, the EU would be conscious of the risk that Trump's demands may not be confined to its goods trade. The potential for a trade confrontation is, therefore, quite significant. The EU will have to decide whether it should roll over and accede to Trump's demands, damaging its industries and the sovereignty of its states. Alternatively, it could emulate China and allow the confrontation to escalate to the point where it threatens a trade embargo, which would, as China's tot-for-tat tariffs did, scare the bejesus out of financial market participants and unnerve the White House. Loading Trump's indiscriminate threats of trade sanctions against America's friends and foes alike have ignited a scramble by the EU and others to secure new markets. There is potential for a new trading bloc, spanning Europe, the non-Chinese Asia Pacific and Latin America, to emerge. Trump and much of his hand-picked cabinet are protectionists and isolationists. At the conclusion of his trade wars on everyone, if much of the rest of the world decides to trade freely among themselves, he might get what he wished for.
Sydney Morning Herald
3 days ago
- Business
- Sydney Morning Herald
Trump makes Europe his next target in his war on the world
It will take years before their commitments to increase their own defence spending might wean them off their reliance on the US for protection from an aggressively expansionist Russia. With Trump also announcing at the weekend that he is considering raising the baseline tariff rate to 15 to 20 per cent, however, they have to take his threat of a 30 per cent tariff – and additional tariffs to match any retaliatory measures they might take – seriously. Trump appears impatient that he hasn't delivered the '90 deals in 90 days' the administration boasted it would deliver, let alone the 200 deals he once said were virtually done. He's also been boosted by the successful passage through Congress of his One Big Beautiful Bill Act and by the buoyancy of US financial markets, which have rebounded from their sell-offs in April, when Trump first unveiled his 'reciprocal' tariffs. In April, he deferred imposition of the tariffs until July (and subsequently deferred them again until next month) because the bond market was 'getting a little queasy.' Now markets have settled, with the sharemarket posting record highs. That may be because investors don't believe he will follow through with the reciprocal tariffs he has threatened – the 'Trump Always Chickens Out' or TACO trade – or because any ill effects from tariffs, most notably increased inflation, have yet to show up in economic data. Loading No-one, including, it seems, Trump himself, knows what he might post next on his Truth Social, so markets are behaving as if nothing has happened until something actually happens. August 1 – the new deadline for his reciprocal tariffs – could be a wake-up moment for markets. The apparent complacency in markets in the meantime is, however, encouraging Trump to be more aggressive and more impatient. There is a risk that, rather than heed, as he has until now, the urgings of calmer voices in his cabinet to negotiate deals, he will follow his personal preference and unilaterally present trade partners with 'take it or leave it' ultimatums. While the EU still appears to believe that Trump's latest threat is a negotiating ploy, they have prepared countermeasures in case it isn't. The EU had drawn up a list of US exports that it could target in response to the baseline tariff and the sectoral tariffs on steel, aluminium and autos, covering about €21 billion ($37 billion) of US exports. Items on that list included chicken, motorcycles and clothing. It has another list, targeting another €72 billion of products, ranging from aircraft to alcohol, with which it could respond to Trump's reciprocal tariffs. It also has what it calls its 'anti-coercion instrument,' or actions that could hit the trade in services, although it is reluctant to deploy that instrument, which it devised in response to a deluge of cheap imports from China. The total trade between the US and EU worth about $US1 trillion ($1.5 trillion), with the EU enjoying a trade surplus in goods of $US235 billion, but a trade deficit in services of about $US75 billion. The EU, in its negotiations with the US, had sought exemptions from Trump's tariffs for key sectors, like aircraft and alcohol, in exchange for a promise to buy more US goods, particularly weapons and LNG, that would narrow the US goods trade deficit. Von der Leyen said on Saturday that the EU was ready to continue to negotiate but prepared to consider retaliation. Imposing 30 per cent tariffs on EU exports would disrupt essential transatlantic supply chains, to the detriment of businesses and consumers on both sides of the Atlantic, she said. The dilemma for the EU is that Trump's view of its non-tariff policies and trade barriers includes its valued-added tax and its regulation of digital activity to protect competition and consumers. No nation state – or, in the EU's case, collection of 27 nation states – would surrender its sovereignty and allow Trump to dictate its domestic policy settings. Having seen what Trump has done to Brazil, threatening a 50 per cent tariff rate in response to unfair trade barriers (even though the US has a trade surplus with Brazil) and its trial of former president Jair Bolsonaro – an enthusiastic Trump supporter – for allegedly plotting a coup, the EU would be conscious of the risk that Trump's demands may not be confined to its goods trade. The potential for a trade confrontation is, therefore, quite significant. The EU will have to decide whether it should roll over and accede to Trump's demands, damaging its industries and the sovereignty of its states. Alternatively, it could emulate China and allow the confrontation to escalate to the point where it threatens a trade embargo, which would – as China's tot-for-tat tariffs did – scare the bejesus out of financial market participants and unnerve the White House. Loading Trump's indiscriminate threats of trade sanctions against America's friends and foes alike have ignited a scramble by the EU and others to secure new markets. There is potential for a new trading bloc, spanning Europe, the non-Chinese Asia Pacific and Latin America, to emerge. Trump and much of his hand-picked cabinet are protectionists and isolationists. At the conclusion of his trade wars on everyone, if much of the rest of the world decides to trade freely among themselves, he might get what he wished for.
The Age
3 days ago
- Business
- The Age
Trump makes Europe his next target in his war on the world
It will take years before their commitments to increase their own defence spending might wean them off their reliance on the US for protection from an aggressively expansionist Russia. With Trump also announcing at the weekend that he is considering raising the baseline tariff rate to 15 to 20 per cent, however, they have to take his threat of a 30 per cent tariff – and additional tariffs to match any retaliatory measures they might take – seriously. Trump appears impatient that he hasn't delivered the '90 deals in 90 days' the administration boasted it would deliver, let alone the 200 deals he once said were virtually done. He's also been boosted by the successful passage through Congress of his One Big Beautiful Bill Act and by the buoyancy of US financial markets, which have rebounded from their sell-offs in April, when Trump first unveiled his 'reciprocal' tariffs. In April, he deferred imposition of the tariffs until July (and subsequently deferred them again until next month) because the bond market was 'getting a little queasy.' Now markets have settled, with the sharemarket posting record highs. That may be because investors don't believe he will follow through with the reciprocal tariffs he has threatened – the 'Trump Always Chickens Out' or TACO trade – or because any ill effects from tariffs, most notably increased inflation, have yet to show up in economic data. Loading No-one, including, it seems, Trump himself, knows what he might post next on his Truth Social, so markets are behaving as if nothing has happened until something actually happens. August 1 – the new deadline for his reciprocal tariffs – could be a wake-up moment for markets. The apparent complacency in markets in the meantime is, however, encouraging Trump to be more aggressive and more impatient. There is a risk that, rather than heed, as he has until now, the urgings of calmer voices in his cabinet to negotiate deals, he will follow his personal preference and unilaterally present trade partners with 'take it or leave it' ultimatums. While the EU still appears to believe that Trump's latest threat is a negotiating ploy, they have prepared countermeasures in case it isn't. The EU had drawn up a list of US exports that it could target in response to the baseline tariff and the sectoral tariffs on steel, aluminium and autos, covering about €21 billion ($37 billion) of US exports. Items on that list included chicken, motorcycles and clothing. It has another list, targeting another €72 billion of products, ranging from aircraft to alcohol, with which it could respond to Trump's reciprocal tariffs. It also has what it calls its 'anti-coercion instrument,' or actions that could hit the trade in services, although it is reluctant to deploy that instrument, which it devised in response to a deluge of cheap imports from China. The total trade between the US and EU worth about $US1 trillion ($1.5 trillion), with the EU enjoying a trade surplus in goods of $US235 billion, but a trade deficit in services of about $US75 billion. The EU, in its negotiations with the US, had sought exemptions from Trump's tariffs for key sectors, like aircraft and alcohol, in exchange for a promise to buy more US goods, particularly weapons and LNG, that would narrow the US goods trade deficit. Von der Leyen said on Saturday that the EU was ready to continue to negotiate but prepared to consider retaliation. Imposing 30 per cent tariffs on EU exports would disrupt essential transatlantic supply chains, to the detriment of businesses and consumers on both sides of the Atlantic, she said. The dilemma for the EU is that Trump's view of its non-tariff policies and trade barriers includes its valued-added tax and its regulation of digital activity to protect competition and consumers. No nation state – or, in the EU's case, collection of 27 nation states – would surrender its sovereignty and allow Trump to dictate its domestic policy settings. Having seen what Trump has done to Brazil, threatening a 50 per cent tariff rate in response to unfair trade barriers (even though the US has a trade surplus with Brazil) and its trial of former president Jair Bolsonaro – an enthusiastic Trump supporter – for allegedly plotting a coup, the EU would be conscious of the risk that Trump's demands may not be confined to its goods trade. The potential for a trade confrontation is, therefore, quite significant. The EU will have to decide whether it should roll over and accede to Trump's demands, damaging its industries and the sovereignty of its states. Alternatively, it could emulate China and allow the confrontation to escalate to the point where it threatens a trade embargo, which would – as China's tot-for-tat tariffs did – scare the bejesus out of financial market participants and unnerve the White House. Loading Trump's indiscriminate threats of trade sanctions against America's friends and foes alike have ignited a scramble by the EU and others to secure new markets. There is potential for a new trading bloc, spanning Europe, the non-Chinese Asia Pacific and Latin America, to emerge. Trump and much of his hand-picked cabinet are protectionists and isolationists. At the conclusion of his trade wars on everyone, if much of the rest of the world decides to trade freely among themselves, he might get what he wished for.
