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Market Volatility Amid Tariff Threats and Trade Talks
Stock markets experienced mixed performance on Wednesday as investors evaluated the implications of Donald Trump’s recent tariff threats. The situation is further complicated by ongoing trade negotiations, with the US president emphasizing that he will not extend the deadline for reaching agreements.
Investors appeared to handle the news about Trump’s new tariff proposals with relative calm. He sent letters to 14 countries detailing his plans for additional levies, expecting most to reach an agreement before a new cutoff date of August 1. However, the market was unsettled on Tuesday when Trump announced a 50% tariff on copper imports and hinted at potential 200% tariffs on pharmaceuticals.
This announcement caused the price of copper—a key material used in cars, construction, and telecoms—to hit a record high on Tuesday. Although the price slightly declined during Asian trading hours, the impact of these tariffs remains significant.
The proposed measures are part of a broader strategy by Trump to impose sector-specific tariffs since returning to the White House. Auto and steel sectors have already been affected by 25% taxes. Additionally, the president has initiated investigations into imports of copper, pharmaceuticals, lumber, semiconductors, and critical minerals, which could lead to more tariffs.
“Today we’re doing copper,” Trump stated during a cabinet meeting. “I believe the tariff on copper, we’re going to make it 50%.” Commerce Secretary Howard Lutnick later mentioned that the rate could take effect at the end of July or on August 1.
Regarding pharmaceuticals, Trump indicated that companies would have about a year or a year and a half to comply before facing a 200% tariff. He also reiterated that no extensions would be granted for the August 1 deadline, following a previous delay from July 9 to allow more time for negotiations.
Despite the looming threat of additional tariffs, equity traders generally remained composed, resulting in a mixed outcome for Wall Street. Similar trends were observed in Asia, where losses in Hong Kong, Sydney, and Wellington were balanced by gains in Shanghai, Singapore, Seoul, Taipei, Manila, and Jakarta. Tokyo remained flat.
Stephen Innes of SPI Asset Management noted, “This is the market equivalent of driving with one foot on the gas and one on the brake—negative headline risk can impact sentiment one minute, while hopes of negotiation breakthroughs ease it the next.” He added that Trump’s posts on Truth Social have become a de facto “risk on-risk off” barometer for global markets, influencing metals, bond yields, and risk premiums.
Fabien Yip, a market analyst at IG, highlighted that “when combined with country-specific tariffs, the impact on prices of goods and services can be far more severe than current levels suggest.”
In terms of economic data, there was minimal reaction to reports showing that Chinese consumer prices rose in June for the first time since January, offering a positive sign for the world’s second-largest economy. However, this was tempered by a sharper-than-expected decline in factory gate prices, indicating continued deflationary pressures.
Key Financial Figures
- Tokyo – Nikkei 225: Flat at 39,677.42
- Hong Kong – Hang Seng Index: Down 0.7% at 23,987.70
- Shanghai – Composite: Up 0.3% at 3,509.35
- Euro/dollar: Down at $1.1724 from $1.1730 on Tuesday
- Pound/dollar: Down at $1.3590 from $1.3592
- Dollar/yen: Up at 146.79 yen from 146.53 yen
- Euro/pound: Up at 86.28 pence from 86.27 pence
- West Texas Intermediate: Down 0.4% at $68.09 per barrel
- Brent North Sea Crude: Down 0.3% at $69.93 per barrel
- New York – Dow: Down 0.4% at 44,240.76 (close)
- London – FTSE 100: Up 0.5% at 8,854.18 (close)
