Today, President Trump directed significant threats towards international trade allies, causing ripples across global markets. This comes as the Federal Reserve’s actions are awaited, with tomorrow bringing the release of their last meeting’s minutes. These documents are expected to offer insights into the Fed’s stance on tariffs and their consequences on inflation and interest rate policies.
What Triggered Market Turmoil?
On April 2nd, an unexpected announcement by Powell set higher-than-anticipated tariff rates, leading to market disruption. To mitigate the downturn, a three-month postponement was enacted alongside a global tariff rate of 10%. As the three-month deadline looms, recent days have seen the dispatch of tariff notifications to several nations.
How Are Countries Responding?
Thus far, only Vietnam and the UK have formalized trade agreements with the US. China has tentatively agreed, necessitating further dialogue. In contrast, Trump asserts that recent tariff notifications serve as agreements themselves.
These tariffs closely resemble the previously set rates announced in early April, introducing a 50% general copper tax and up to 200% on pharmaceutical imports. Despite this, BTC remains stable at $108,800, calming fears of drastic market declines. Speculation abounds regarding an imminent EU deal, underlined by Trump’s recent declarations about the narrowing window for agreements.
Kyle provided his perspective on these developments:
“Has Liberation Day 2.0 started? Trump is deploying ‘trade letters’ with new tariffs: 25% for Japan and South Korea, climbing to 36% for Thailand and Bangladesh. If these countries resist, tariffs could escalate further. June’s customs revenues alone reached $27.3 billion. Tariffs are transitioning from diplomatic levers to funding strategies, influencing markets now. It’s not mere bluster; a policy is in the making. Watch carefully.”
What Does This Mean for Inflation?
While tariffs nearing 40% will not directly increase inflation by the same margin, import price spikes will indirectly pressure inflation upward. This reversal in trends worries the Fed, as evidenced by their decision to maintain interest rates and their public comments.
President Trump differs in opinion with Powell, recently using social media to cite a study claiming tariffs have no inflationary effect, countering prevalent views.
“A new study by the Council of Economic Advisers shows tariffs have zero impact on inflation. In fact, import prices have decreased, as I always said. Fake news and so-called ‘experts’ got it wrong again. Show this study to Jerome Powell, who has been whining about non-existent inflation and refusing to act correctly. CUT INTEREST RATES, JEROME — NOW’S THE TIME!”
The anticipation concludes tomorrow with the Federal Reserve minutes release, along with statements from several Fed members. The day is expected to bring further tariff notifications, potential news of an EU agreement, and key Fed commentary, keeping the financial world on edge.
