The stock market, as measured by stock futures, cratered on Wednesday. This decline followed directly on the heels of President Donald Trump’s announcement that tariffs would be implemented August 1, rather than the previously planned July 9. This change has triggered justifiable alarm among investors. Their fears are heightened as the U.S. comes to a crucial deadline to complete a trade deal with the European Union.
This change would result in duties going up to 50% on EU products. The urgency of the moment demands innovation. With the U.S. having effectively only locked in those trade agreements with a small handful of countries so far, it’s doubly so. Just this past May, the international organization came to an accord with the United Kingdom to maintain a 10% tariff rate. It similarly reached an agreement with Vietnam, reducing tariffs on hundreds of products from 46% to 20%.
Despite these efforts, Wall Street’s optimism would prove fleeting. In reaction to the announcement, Dow Jones Industrial Average futures fell by 110 points, or 0.3%. At the same time, both S&P 500 and Nasdaq 100 futures were down 0.3%. The decline comes one week after huge weekly advances that pushed the S&P 500 and Nasdaq Composite to all-time highs. This investor confidence was primarily fueled by expectations that the Trump administration would back away from releasing the worst of those tariffs.
“Tariffs go into effect Aug. 1. But the president is setting the rates, and the deals, right now.” This comment drives home how fluid negotiations are and how quickly tariff rates can change as talks evolve.
Market analysts are warning against the possible fallout from these expensive trade negotiations. Rajeev Sibal noted, “Ultimately, trade negotiations usually take a long time to negotiate. Free trade arrangements the US negotiated have taken an average of 3 years.” This further emphasizes the difficulty of reaching complex, multi-party deals in a timely manner.
Investor sentiment continues to be mixed as they come to terms with the changed timeline for the imposition of tariffs. To paraphrase the famous Bull Tom Lee, this is the most hated V-shaped rally. He was doubtful that recent market gains can hold, particularly with trade tensions still ongoing.