"Tariff Fatigue" on Wall Street: US Tariffs Not Phasing Traders Anymore
US trade taxes don't weigh down Wall Street financially
The term "tariff fatigue" refers to the investors' growing acceptance and adaptation to trade conflicts and recurring tariff announcements. Traders on Wall Street appear to have embraced this new normal, with President Trump's latest tariff announcements barely causing a ripple in the stock market.
An Adjusted Market Response
Initially, trade wars and tariff impositions create a wave of uncertainty, resulting in economic volatility and stock market fluctuations. However, with recurring announcements, traders seem to be becoming accustomed, leading to a less dramatic market response. Though there still exists an air of uncertainty regarding further developments in the trade conflict, the indices are on an upward trend.
The Tariff Battlefield
President Trump's announcement to double tariffs on steel and aluminum imports to 50 percent from June 4 is causing concerns regarding potential collateral damage. Additionally, the trade peace between the US and China is under threat, with both nations accusing each other of subverting the recently agreed trade deals. The handling of rare earths is another contentious issue that threatens the fragile trade truce[2].
Dealing with the New Normal
Market Strategist Jim Reid of Deutsche Bank comments, "It's really challenging to keep track of what's happening in trade these days. For now, it appears that tariff uncertainty will persist, even if we've probably reached the zenith of US policy aggression."
A Mixed Economic Picture
The U.S. industry reported a slowdown in May, according to ISM, but there was a strengthening compared to the previous month in S&P Global's survey for the U.S. industry.
The Retaliatory Measure & Its Consequences
The proposed retaliatory measure in a tax law by US President Trump, which would impose a 20 percent tax on foreigners with US investments, has caused some unease. This new levy, sometimes referred to as a "revenge tax," could potentially reduce demand for US assets and negatively impact the dollar.
Gold & Oil: The Safe Haven
Market participants flocked to gold as a safe haven, supported by the weak dollar, and an escalating trade conflict. Similarly, Russian news fueled oil prices, with both Brent and WTI rising by up to 3.8 percent.
The Unpredictable Future
The re-escalating trade conflict led to an influx into the supposedly safe haven of gold, while the proposed revenge tax could potentially reduce demand for US assets and weigh on the dollar. The overall economic impact of tariffs remains a primary concern. Financial institutions like Goldman Sachs indicate a significant chance of recession within the next year, pointing to the ongoing uncertainty and potential for market volatility.
[1] Companies with higher margins have the advantage of mitigating tariff costs by absorbing them or passing them onto consumers, which can impact market perceptions of their resilience.
[2] The re-escalating trade conflict between the US and China threatens to derail the trade peace and break down over the handling of rare earths.
[3] The overall economic impact of tariffs is a point of concern for financial institutions like Goldman Sachs, signaling a significant chance of recession within the next year.
[4] The U.S. dollar's status as a global reserve currency and the U.S. economy's influence on global markets mean that tariffs can have far-reaching effects beyond domestic markets.
- The Commission, comprising financial analysts and market strategists, such as Jim Reid of Deutsche Bank, is constantly grappling with understanding the ongoing tariff battles and their impacts on various sectors, including business and politics.
- Despite the tariff fatigue that has caused traders to become accustomed to trade conflicts and tariff announcements, The Commission recognizes the potential repercussions of the proposed finance measures, like the retaliatory tax law, on the general-news front, as they could impact the value of US assets and the strength of the US dollar, directly affecting global markets.
