This time last year if the U.S. had been on the brink of an 145% tariff increase on exports from China, markets would have been in meltdown. They would have spiralled even further if they believed a reciprocal 125% hike would be put in place by Beijing.<\/p>\n
Fast forward to 2025, and the end of President Trump\u2019s 90-day pause in a tit-for-tat trade war<\/a> with China approaches with little drama.<\/p>\n Markets have become accustomed to the White House\u2019s malleable deadlines, to say the least. In fact, investors got so comfortable with the U-turns that the phrase \u201cTACO\u201d (Trump Always Chickens Out) was coined to describe how they bet on the markets.<\/p>\n And the Oval Office didn\u2019t disappoint. The White House announced yesterday that a further three-month delay had been agreed with China. As such, reciprocal tariffs rates will remain at the rolled-back position of 30% for the U.S. and 10% for China.<\/p>\n Once upon a time, this decision would have been an eleventh hour save\u2014but in 2025 markets barely blipped. Before the opening bell in New York, S&P 500 futures are flat, after the index closed down 0.25% yesterday. The Dow<\/a> Jones closed down 0.45% and the Nasdaq<\/a> was down 0.3%.<\/p>\n Over in Asia, instead of being rocked by tension with their Western neighbors markets were positively upbeat. Tokyo\u2019s Nikkei 225 bounced up 2.15% on opening, Shanghai\u2019s Composite Index was up 0.5% and Hong Kong\u2019s Hang Seng Index was up 0.25.<\/p>\n Europe was relatively flat on opening: London\u2019s FTSE 100 was up a modest 0.27% while Germany\u2019s DAX was down a minor 0.1%. <\/p>\n \u201cTrump retreated from today\u2019s deadline for higher trade taxes in imports from China. Markets expected this,\u201d noted UBS\u2019s Paul Donovan to clients this morning. <\/p>\n Likewise Deutsche Bank\u2019s Jim Reid wrote to clients Tuesday morning that investors are eyeing the end of the week as the market-mover, casting the near-miss on China into the background. <\/p>\n \u201cMarkets have been relatively subdued over the last 24 hours, as investors await today\u2019s U.S. CPI print and the much anticipated Trump-Putin summit on Friday,\u201d Reid said. \u201cOne obstacle for the week has passed as Trump last night extended the U.S.-China trade truce for another 90 days.\u00a0The previous deadline was due to expire today. So with investors very much in wait-and-see mode, major asset classes only saw modest moves yesterday, with the S&P 500 (-0.25%) closing slightly lower, whilst 10yr Treasury yields (+0.3bps) moved very little all day.\u201d<\/p>\n Some have defended Trump\u2019s see-sawing positions, saying the Oval Office has been right to give its negotiators more room to breathe. Last month, JPMorgan\u2019s CEO, Jamie Dimon, told an event in Ireland that Trump had been right to extend certain deadlines,<\/a> saying: \u201cI hate to use the word \u2018TACO trade\u2019 because I think he did the right thing to chicken out.\u201d<\/p>\n He added, per the\u00a0Financial Times<\/a>: \u201cUnfortunately, I think there is complacency in the market\u201d which is now depending on such swings and delays in policy.<\/p>\n Shifting patterns<\/p>\n The crux of the negotiations during the first delay between Washington and China was coming to an agreement on rare earth minerals. On this, U.S. Trade Representative Jamieson Greer said talks are \u201cabout halfway there.\u201d <\/p>\n But despite signs that the nations are closing in on a deal, trade patterns have already shifted toward a new reality where the countries work less closely together. Whether this will result in President Trump\u2019s much-preferred domestic growth, or merely exporting from cheaper nations, remains to be seen. <\/p>\n Oxford Economics\u2019s lead economist Adam Slater noted to clients yesterday that the two biggest slumps in imports to the U.S. came from Canada (where imports are down 25% from January) and China, where imports are down 50% from January. <\/p>\n Slater added: \u201cChina\u2019s share in U.S. imports has halved since the start of the year to just 7%. Given the large size of the tariff hikes imposed on China, this is not too surprising. But we would note that there is some uncertainty about the real scale of the impact of tariffs on China\u2014Chinese data on exports to the U.S. shows a much less dramatic decline of around 25% since January. This may partly reflect re-routing of Chinese goods through other countries.\u201d <\/p>\n The economist noted that tariffs are \u201chighly uneven\u201d between headline rates and applied rates on certain nations, due to various sectoral tariffs and exemptions. This week alone, for example, Trump allowed chipmakers Nvidia<\/a> and AMD to sell in China as long as they shared 15% of the revenues with the U.S. government. <\/p>\n How this fits in with tariff negotiations remains to be seen, but Slater adds: \u201cWhat is clear is that the wide variety of tariff rates across U.S. trading partners implies a lot of scope for trade patterns to shift, with U.S. importers shifting away from highly tariffed countries like China. Some of this may\u00a0already be visible\u00a0in the data.\u201d<\/p>\n Here\u2019s a snapshot of the action prior to the opening bell in New York:<\/p>\n S&P 500 closed down 0.25% yesterday.\u00a0S&P futures were flat this morning, premarket.<\/p>\n STOXX Europe 600\u00a0was flat in early trading.\u00a0<\/p>\n The U.K.\u2019s FTSE 100\u00a0was up 0.15% in early trading.<\/p>\n Japan\u2019s Nikkei 225\u00a0was up 2.15%.\u00a0<\/p>\n China\u2019s CSI 300\u00a0was up 0.5%.\u00a0<\/p>\n India\u2019s Nifty 50\u00a0was down 0.4%.\u00a0<\/p>\n