Hey ChatGPT, take the other 394 week ahead articles it feels like I’ve written on tariffs this year, move the words around, insert a few pithy jokes and replace any references to 9 July to 1 August. Nobody will ever know…

Sure, says ChatGPT, but in customary AI fashion, let me start by offering some grand-but-bland platitudes on the nobility of your recent articles, and allow me to provide my utmost but not-at-all genuine congratulations on presenting me with such a groundbreaking idea… (why does AI do this, by the way?)

Obviously, I didn’t actually ask AI to write this (it would say that, though, wouldn’t it?). But the point is that after three tariff delays, is there any doubt that we will get a fourth next Friday?

Granted, this time does look a little different. President Trump has begun to formalise deals with key trading partners. And at the time of writing, the key question is whether the EU can secure a deal along the lines of Japan’s, where carmakers get a partial reprieve on the current 25% levy. AI told me the probability of that happening was 65% – make of that what you will.

But deal or delay, is there much difference? What these deals essentially do is formalise the existing status quo, albeit with a slightly higher baseline tariff. For the US, it bakes in the flow of tariff revenue, while keeping the threat of retaliation at bay. And its trading partners hope that by removing the rolling threat of escalation, it can provide its companies and consumers with a more stable economic environment.

How true that is depends on how long these deals last, and that’s clearly debatable. And as the UK has discovered, the deals still leave many unanswered questions. Chiefly, what happens if (when?) the US imposes its long-threatened pharmaceutical tariffs. Remember, for the EU, this is 20% of what it exports to America. If this happens, the risk of retaliation from American trading partners surely goes up. And with it, the risk of a further escalation from President Trump.

So the point I’ve been banging on about for weeks hasn’t changed: tariffs are unlikely to go down and may well go up. And that’s one of the central reasons we still think the European Central Bank will cut rates again in September.

True, President Lagarde’s press conference wasn’t exactly a glowing endorsement of that view. But the near-term risks on inflation and growth are downwards. And that probably merits a bit of extra easing. Further euro strength, if it comes, would only cement that view.

That’s all a bit academic, though, isn’t it? An extra rate cut here or there isn’t moving the needle of history. What might, however, is when – and how far – the ECB is forced to hike rates. And Carsten Brzeski told our live webinar this week that this could potentially come before the end of 2026. That – unsurprisingly – is based on the view that Germany’s defence and infrastructure spending would revitalise growth next year.

Bearing in mind that Carsten is just about the most cynical German I know, this caught me off guard. Speaking as an equally cynical Brit – from a place where capital projects tend to end up wildly behind schedule – surely the risk is that the economic impact comes much later than many currently think? His answer was no. And he even went as far as saying that Germany could outperform the wider European economy next year.

Back to tariffs, and perhaps part of the reason why the US administration feels emboldened to ratchet up tariffs next week, at least when it comes to copper, is that so far, the macro impact has been remarkably benign.

The jobs market looks solid, though the foundations are a little shakier when you dig beneath the surface. And remember, we are gearing up for some chunky downward revisions to past payroll figures later this summer. Still, when we get new figures next week, there’s unlikely to be much that screams a need for the Federal Reserve to start cutting rates again. And certainly nobody is expecting that to happen next week.

Markets are still favouring the first 25 basis points in September, but as James Knightley writes below, this relies on this summer’s inflation data remaining remarkably benign. And we don’t think that will be the case, even if the broader story is looking better.

Don’t forget that June’s core CPI data did show further signs of tariff passthrough – you only need look at audio equipment and household appliances to see costs taking off. But that was masked by big falls in new and used cars, a trend that surely can’t continue given the tariffs clouding the sector.

Bottom line – no Fed rate cut until December. But when the cuts do come, they could come thick and fast.

Before I go, a reminder that we’re conducting an electrifying webinar on copper tariffs next week, your chance to stay up to date with the current developments. And hear jokes like “why did the copper wire refuse to pay the tariff? It didn’t want to get charged twice!”

Ok, maybe AI did write that bit…

James Smith