This text discusses the impact of tariff uncertainty on global markets, particularly in the context of potential trade deals between the US and major economies like Japan, the EU, India, and Korea.
Here’s a breakdown of the key points:
Market Comfort with 10% Tariffs: The market was initially comfortable with 10% tariffs.
Escalating Tariff Concerns: However, the prospect of higher tariffs (15%, 20%, 25%, 30%) is causing concern.
Hesitation to Sign Deals: Major trading partners are hesitant to finalize deals with the US under the current president. This is because they lack confidence that any agreement will be final, fearing the president might later seek to renegotiate terms.
“Taco” Acronym and Shifting Market Sentiment: The market previously believed the president might back down from imposing higher tariffs (likened to “chickening out” or “taco”). However,there’s a growing concern that the president might be trying to prove he’s not “taco,” leading to potential tariff-related turmoil.
Ignoring Past Events: Markets have largely ignored previous events (like “Liberation Day”) and are now starting to worry about the reality of perhaps higher tariffs.
Other Uncertainties: In addition to tariffs,there’s also uncertainty surrounding the president’s potential actions regarding the Federal Reserve Chair (Powell) and interest rate policy.
Impact on market Rally: The combination of these uncertainties suggests that markets may not be able to continue their recent rally.
India-US Trade Deal Status: The trade deal between India and the US is still in progress, with the fifth round of talks concluded but no major announcements. The deal is reportedly being sent back to India from the US.
Market Reaction to No Deal: If no trade deal is announced by August 1st (after passing the July 9th deadline), it will be negative for all global economies, including India.
India’s Relative Impact: While India will be impacted, it might be less affected than other countries as its merchandise trade is a smaller percentage of its GDP.
* Need for Worry: The speaker emphasizes that this situation is something to worry about, as the initial assumption of a favorable outcome is proving uncertain.
In essence, the text highlights a shift in market sentiment from complacency to concern due to the unpredictable nature of US trade policy and the potential for escalating tariffs, which could derail recent market gains. The lack of progress on specific trade deals,like the one with India,further exacerbates these worries.