TRUMP’S TARIFF BLITZ SHAKES GLOBAL MARKETS
United States (US) President, Donald Trump, has reignited global trade tensions with a sweeping set of new tariffs announced throughout the week, as the 90–day hiatus following the 2 April “Liberation Day” tariff announcement came to an end on 9 July. Sky high duties will hit dozens of US trading partners, as Trump pushes for more “reciprocal” or “fair” trading terms. The move, delivered via letters and social media, signals a sharp escalation in his protectionist agenda.
WHO IS AFFECTED?
- Japan and South Korea: Both hit with 25% tariffs from 1 August. Trump cited trade imbalances and is pushing for local production in the US.
- Dozens in the firing line: Over a dozen countries – including South Africa (30%), Bangladesh (35%), and Thailand (36%) face increased levies. Announcements on countries being added to the list are likely to follow.
- BRICS, commodities and pharmaceuticals: A blanket 10% additional tariff on BRICS imports was announced, along with a 50% duty on all copper imports. In addition, a possible 200% tax on pharmaceuticals has added to the market’s anxiety.
WHY NOW?
Trump says the US has been shortchanged on trade for too long. He framed the tariffs as a fast-track fix to what he sees as the inequity in trade. He also stressed that while disputes could be resolved in weeks, any retaliation would bring even harsher penalties.
MARKET AND GLOBAL REACTION
- Lacklustre market reaction: It seems that the markets are waiting for the dust to settle with minor responses in equities, which are currently hovering near record highs, and some weakening in emerging market currencies, but not nearly to the extent that we witnessed in April.
- Global pushback: Affected countries are exploring retaliatory measures or are seeking last–minute talks. But the White House insists 1 August is a firm deadline.
STIRRING A VOLATILE POT – FED MINUTES REVEAL POLICY DIVIDE
Adding to the uncertainty around the latest tariff shock, June’s Federal Reserve (Fed) Federal Open Market Committee (FOMC) meeting minutes, released on Wednesday, showed that the committee was divided about how tariffs will impact US inflation. As such, there was a narrow margin split over rate cuts.
WHAT THE FED IS SAYING
- Rate outlook: Most Fed officials see cuts later this year, but few back a July move, while some want to hold rates steady throughout 2025. According to the CME FedWatch, there is only a 6,7% chance of a rate cut in July, down from the 21% anticipated earlier this month, and a 68% chance of a cut in September, also down from the 80% projected earlier in July.
- Tariff troubles: Officials debated whether tariffs would cause lasting inflation or just a short-term spike but there is no consensus yet.
- Status quo: The Fed has reiterated its current wait–and–see, data–driven approach to determine future policy moves.
POLITICS AND PRESSURE
- Trump vs Powell: Trump continues to push for deep rate cuts and has even called for Fed Chair, Jerome Powell’s resignation. Powell, however, is standing firm as he insists all Fed decisions will be data driven.
- Data watch: With US labour market resilience and steady growth, the Fed is holding out for further inflation and employment figures before acting.
WHAT IS NEXT?
The remainder of July could be pivotal. Between Trump’s hard tariff line and the Fed’s cautious monetary policy stance, economic uncertainty is running high.
- Trade risks: Trump’s aggressive approach may disrupt global supply chains and relations with allies and emerging markets alike.
- Fed caution: The US central bank’s internal disagreements reflect the challenge of balancing inflation concerns with cooling US growth.
All eyes are now on incoming data – and how markets, governments, and central banks respond to what could be an unpredictable end to the month.
A LOOK AT THE MARKETS
THIS WEEK’S KEY THEMES:
- The yield on the 10–year US Treasury note hovering around 4.36%
- S&P 500 and Nasdaq Composite both closed at record highs on Thursday
- Copper set for weekly gain of nearly 10%
- US Dollar Index gains 1% on inflationary concerns over tariffs
BONDS
The yield on the 10–year US Treasury note remained around 4.36% this morning after a turbulent week shaped by trade tensions and policy shifts. Markets were unsettled by Trump’s announcement that he would hit Canada with a 35% tariff starting 1 August, with plans for similar measures, of between 15% and 20%, for most other countries. Earlier, 50% tariffs were also imposed on Brazilian goods and copper imports. On the monetary policy side, Chicago Fed President, Austan Goolsbee, rejected the idea of rate cuts intended to ease government debt costs, stressing that the Fed’s focus is on managing inflation and employment. US labour data remains strong, with jobless claims falling again, supporting a resilient US economic outlook.
In the United Kingdom (UK), 10–year Gilt yields steadied at 4.6%, helped by the US pushing back its UK tariff deadline. However, risks remain, including a record £77 billion in hedge fund borrowing through gilt repos, reduced gilt demand from pension funds, and the Bank of England (BoE) selling its gilt holdings.
Germany’s 10-year Bund yield held at 2.635%, with attention on European Union (EU)–US trade talks. EU officials hinted a deal was near, focusing on auto sector protections. At the same time, German exports and imports fell, though industrial output beat expectations.
South Africa’s 10–year bond yield rose above 9.80% amid tensions within the Government of National Unity and US tariff threats linked to BRICS alliances.
INDICES
US stock futures were largely flat this morning after a strong performance on Thursday, when the S&P 500 and Nasdaq Composite each closed at record highs. On Thursday, the S&P 500 gained 0.27%, the Nasdaq rose 0.09%, and the Dow increased by 0.43%. Investors appeared to largely discount new trade actions from the Trump administration. In company news, chip manufacturing giant, Nvidia, rose 0.75%, continuing its momentum after surpassing a $4 trillion market valuation. Electric vehicle manufacturer, Tesla’s shares climbed 4.7%, boosted by optimism about its robotaxi initiative and plans to incorporate the Grok AI assistant into its vehicles. US airline, Delta Airlines, advanced 12% after reaffirming its annual profit outlook, lifting broader travel stocks.
The UK’s FTSE 100 reached a record high on Thursday, up 1.3%, led by gains in mining companies such as Glencore, Rio Tinto, and Anglo American. Their rise followed confirmation of US copper tariffs starting 1 August. Healthcare stocks like AstraZeneca and GlaxoSmithKline also rose, while communications holding company, WPP, recovered modestly after appointing a new CEO. Germany’s DAX slipped 0.4% amid caution over ongoing US–EU trade talks, while South Africa’s All Share Index edged up 0.14%, continuing its year-on-year gains as it follows market direction.
COMMODITIES
Copper futures remained elevated in early trade on Friday and appeared set for a weekly gain of about 10%, following the US administration’s decision to impose a 50% tariff on copper imports starting 1 August. The move came after a US national security review emphasised copper’s importance as a critical input in sectors like defence, electronics, batteries, and aerospace. It is reportedly the second-most used material by the US Department of Defence. With nearly half of US copper needs supplied through imports – mainly from Chile – Trump is hoping the tariffs will boost the US copper industry. However, the new tariff has created a pricing gap, pushing US futures to a 27% premium over London contracts.
Brent crude rose above $69/barrel, posting a second straight weekly gain. This recovery came after two Red Sea shipping attacks raised concerns about regional supply chains. However, market sentiment remains mixed. The broader impact of new US tariffs – 35% on Canadian imports, including its biggest import of crude petroleum, and up to 20% on others – has triggered worries over slower global growth and weaker oil demand. The Organisation of the Petroleum Exporting Countries (OPEC), meanwhile, cut its demand forecast and may pause output increases later this year.
Gold edged higher to around $3,330/ounce, supported by safe-haven demand. Ongoing trade uncertainty and Trump’s calls for sharply lower US interest rates have stirred inflation concerns and speculation over future Fed policy shifts.
CURRENCIES
The US Dollar Index moved closer to the 98 mark on Friday morning, set to end the week nearly 1% higher. This strength came on the back of growing trade tensions, with tariffs adding to concern about upward pressure on inflation and mixed signals on monetary policy as US jobless claims hinted at a still strong but softening labour market.
The euro traded around $1.17/EUR, remaining near three-year highs against the greenback, supported by optimism over an EU–US trade deal, ongoing capital rotation and upbeat sentiment amidst strong EU fiscal stimulus. EU–US talks appear to be progressing, with the EU trade commissioner noting a deal could be reached soon. The euro has gained nearly 13% this year, boosted by a weaker dollar, revived fiscal support in Germany, and expectations of at least one more European Central Bank rate cut in 2025.
The British pound slipped below $1.36/GBP as concerns over the UK’s fiscal sustainability and steel tariffs weighed. The UK’s Independent Office for Budget Responsibility forecast public debt could rise to 270% of GDP by the 2070s.
In South Africa, the rand traded mostly sideways this week, following a weakening after the stir up of trade tensions. Trump warned that a 30% duty could still apply to South African exports but left the door open for negotiation. South Africa is seeking reduced tariffs and exemptions for vehicles, agriculture, and metals. With inflation low and economic activity subdued, the South African Reserve Bank may consider cutting rates later this year, though the timing remains uncertain.
*All information and data is as at the time of writing.
Key indicators:
USD/ZAR:17.82
EUR/ZAR: 20.88
GBP/ZAR: 24.15
Gold: $3,336
Brent Crude: $69
Sources: Federal Reserve, Reuters, Trading Economics, Bloomberg and LSEG Workspace.
Written by Citadel Advisory Partner and Citadel Global Director, Bianca Botes.
Weekly Wrap content provided by Citadel Pty Ltd
