European markets are becoming more and more jittery. The increasing U.S. tariffs add to the uncertainty that already exists as the U.S. and EU continue their own trade negotiations. Things have only escalated since the last tariff pause expired. President Donald Trump has threatened to veto any extension beyond August 1. This recent development is extremely worrisome for economic stability in both areas.
Market analysts are watching a surprise 50% tax on copper. This has pushed COMEX futures to all-time highs, sending a strong negative signal of increasing inflationary pressure. Prices on India’s Multi Commodity Exchange (MCX) have started to decline, a sign of the complicated global trading dynamics at play. The closeness of these markets highlights just how far-reaching the impact of U.S. trade policies could be.
The impact of these tariffs goes much further than just commodity prices. Economists predict that ongoing trade tensions and unexpected mass deportations may subtract as much as a full percentage point from the GDP. Each of these factors could push prices up by an estimated 0.16 to 0.21 points. This development will make an already complicated economic environment even more complicated.
As inflationary pressures subside, the Federal Reserve will have to make an incredibly difficult choice in the second half of 2025. Policymakers should tread cautiously to avoid unintended consequences of high prices while addressing the impact of increased costs on American consumers and manufacturers. As mentioned, this unique inflationary environment is leading to some sectors really being the best hedge against inflation. Consumer staples, healthcare, and metals and mining exchange-traded funds (ETFs) are positioned to offer some protection against the escalating inflation.
European markets are still especially skittish in response to any U.S. tariff and trade negotiation developments. With climbing tariffs and cloudy EU negotiations, it’s become a very tenuous landscape. Both investors and policymakers have an enormous task ahead of them in defining success in this confusing new environment. Yet as Democrats and Republicans on both sides of the aisle negotiate, the specter of economic disruption hangs above.