(Bloomberg) — Financial markets, which have shown increasing insensitivity to tariff threats from the US, will face a test at the Monday open after President Donald Trump declared a 30% rate for the European Union and Mexico effective Aug. 1.<\/p>\n
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Trump has ratcheted up trade measures, promising that more tariffs are coming to everyone from Canada to Brazil to Algeria and inviting trading partners to negotiate further. Despite warnings of complacency from the likes of JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon, investors have so far behaved as if they\u2019re counting on the US president to back down, having seen previous U-turns from his administration.<\/p>\n
\u201cInvestors shouldn\u2019t bank on Trump only bluffing with the 30% tariff threat on EU goods,\u201d Brian Jacobsen, chief economist at Annex Wealth Management, wrote in an email. \u201cThat level of tariffs is punitive, but it likely hurts them more than the US, so the clock is ticking.\u201d<\/p>\n
Currency markets suggested risk appetite is beginning to wane, with the dollar and Japanese yen edging higher against most Group-of-10 peers in early trading while the Australian dollar and euro led losses. The euro touched its strongest level against the dollar since 2021 this month as investors assessed the region\u2019s relative growth prospects. Meanwhile, the Mexican peso set a one-year high of 18.5525 versus the dollar on July 9.<\/p>\n
Bitcoin, which trades through the weekend, climbed to as high as $119,489 in early trading Monday, a fresh record high.<\/p>\n
President Trump and his allies\u2019 criticism of Jerome Powell\u2019s handling of the expensive renovation of the Fed\u2019s headquarters \u2014 with some administration officials building a case to remove Powell from the Fed\u2019s Board of Governors \u2014 may also weigh on markets at the start of the week.<\/p>\n
Deutsche Bank AG strategist George Saravelos said the potential dismissal of Powell is a major and underpriced risk that could trigger a selloff in the US dollar and Treasuries.<\/p>\n
\u201cIf Trump were to force Powell out, the subsequent 24 hours would probably see a drop of at least 3% to 4% in the trade-weighted dollar, as well as a 30 to 40 basis point fixed-income selloff,\u201d Saravelos said.<\/p>\n
The greenback and bonds would carry a \u201cpersistent\u201d risk premium, he said in a note, adding that investors may also grow anxious about the potential politicization of the Fed\u2019s swap lines with other central banks.<\/p>\n
Story Continues <\/p>\n
Tariff Campaign<\/p>\n
Financial markets have been struggling with how to price in the on-again, off-again tariff campaign instigated by Trump so far in his second term. While markets responded to the April 2 \u201cLiberation Day\u201d announcements by selling risk assets and even US Treasuries, those moves have now almost all reversed as the president delayed many of his threatened levies.<\/p>\n
The EU had been trying to conclude a tentative deal with the US to stave off higher tariffs, but Trump\u2019s letter punctured the recent optimism in Brussels. The US president did, however, leave an opening for additional adjustments.<\/p>\n
\u201cAs usual, there are many conditions and clauses that can get these rates reduced,\u201d Jacobsen wrote. \u201cThat\u2019s probably why the market might not like the tariff talk, but it\u2019s not panicking about it either.\u201d<\/p>\n
Even when Trump said that Aug. 1 would be a hard deadline, markets reacted as if that date was still negotiable. They did show some signs of caution Friday, when stocks fell from all-time highs as Trump intensified his trade offensive, and the dollar rallied for its best week since February.<\/p>\n
\u201cThe market isn\u2019t believing Trump, so we may see pressure on the exchange rate, but only temporarily,\u201d said Gabriela Siller, director of economic analysis at Grupo Financiero Base. \u201cUnless the tariff actually goes into effect and is collected, because according to US trade data, the IEEPA tariffs aren\u2019t being collected to the letter.\u201d<\/p>\n
In his letter to Mexican President Claudia Sheinbaum, Trump said the country has been \u201chelping me secure the border,\u201d but added that it wasn\u2019t enough. The US doesn\u2019t intend to apply the 30% rate to USMCA-compliant goods, according to a White House official.<\/p>\n
–With assistance from Kelsey Butler.<\/p>\n
(Updates bitcoin and currency moves in fourth and fifth paragraphs.)<\/p>\n
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\u00a92025 Bloomberg L.P.<\/p>\n","protected":false},"excerpt":{"rendered":"(Bloomberg) — Financial markets, which have shown increasing insensitivity to tariff threats from the US, will face a…\n","protected":false},"author":2,"featured_media":7739,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[36],"tags":[7904,7908,28,7906,12,101,5335,7905,2938,7907],"class_list":["post-7738","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-bloomberg","tag-brian-jacobsen","tag-business","tag-currency-markets","tag-donald-trump","tag-economy","tag-european-union","tag-financial-markets","tag-jerome-powell","tag-risk-appetite"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/7738","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=7738"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/7738\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/7739"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=7738"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=7738"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=7738"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}