US President Donald Trump has imposed new tariffs on Brazil and Canada, escalating his trade policies with the two countries. The move comes as investors are wary of a potential market meltdown due to rising inflation, interest rates, and the increased deficit.
The stock market has been on a historic rally for three months, but investors seem disinclined to stop it. Trump’s tariffs have been met with a mixed response, with some analysts predicting a strong sell-off if he doesn’t back down. However, others believe that the TACO trade – the assumption that Trump will always chicken out of major tariff threats – may hold.
The administration’s latest 21 letters indicate a weighted average tariff of 30%, which is triple what the market is currently pricing in for levies. JPMorgan Chase CEO Jamie Dimon warned that investors are underpricing the risk of Fed hikes and increased inflation, adding to market friction.
As the new trade deadline approaches on August 1, market nerves will increase. The rally’s momentum could be tested if Trump adopts tougher negotiation tactics, potentially threatening the current price surge. Investors are now facing a crucial decision: whether they should care about tariffs again or stick with their optimistic views.
The situation highlights the ongoing uncertainty surrounding Trump’s trade policies and the impact on the markets. With the deadline looming, investors will need to carefully assess the risks and rewards of the tariff negotiations ahead.
Source: https://www.axios.com/2025/07/11/trump-tariffs-markets-canada-eu