The United States has turned up the heat by announcing new tariffs. They will be from 25% to 40% on a wide array of imported goods, representing a further deepening of the trade war. Shockingly, even with this historic announcement, markets have shown very little reaction. Though likely due to growing fiscal pressure, analysts tout the extension of the negotiation deadline to August 1st as an encouraging move in the right direction. This positive change provides stakeholders much-needed time to address emerging trade concerns.
The U.S. government’s approach to the manner of tariff implementation shows something about its overall strategy in this increasingly-turning China-U.S. This hawkish approach has spurred fears of rising inflation, which has been rising along with the imposition of these tariffs. Experts warn that as tariffs drive up prices on imported goods, consumers and businesses may face higher costs in the coming months.
Japan’s repatriation risks have similarly come under scrutiny. As the U.S. engages in these trade disputes, Japanese companies operating in the U.S. are grappling with uncertainties surrounding their investments and operations. Though this was already a concern, the possibility of drastically raised tariffs would drive even more of their decisions around production and distribution into the American market.
Equities have withstood all of these macro headwinds, all but the cities’ dramatic stock market rescue, which would be required in order to save some of them. Investors should think strategically about how the new tariffs will affect their broader investment strategies. Consequently, trading volumes have reacted with extreme risk aversion.
Market analysts view the delayed negotiation deadline as a rare bright spot that could provide room for compromise. The extension allows for more dialogue and potential compromises, which may mitigate some of the immediate impacts felt by consumers and businesses alike. Though stakeholders are appropriately wary, advocates and industry stakeholders alike are hopeful that the extra time will encourage fruitful discussion and ultimately a better result.