What do Trump's revised tariff rates mean for global markets?

Trump pushes back tariff timeline with revised rates

President Trump announced overnight a significant shift in his trade policy, postponing the implementation of reciprocal tariffs from 9 July to 1 August. The revised plan includes adjusted tariff rates for 14 countries, with the White House indicating more announcements will follow.

The latest development has created considerable uncertainty across global markets. The timing change suggests the administration is still fine-tuning its approach to international trade relationships.

Strategic tariff approach targets countries and sectors

The latest tariff announcement covers 14 countries with rates ranging from 25% to 40%. Japan's rate increased from 24% to 25%, while Cambodia saw a significant reduction from 49% to 36%.

Notable exclusions from this round include major trading partners such as the European Union, Taiwan, and India, suggesting these economies maybe still under trade negotiations. China, Mexico, and Canada are expected to have separate discussions due to existing trade agreements.

Beyond country-specific measures, the Trump administration is expected to announce sector-specific levies in due course. So far, automobiles, steel and aluminium already face specific tariffs. The probe on other sectors have begun with current investigations covering industries such as semiconductors, pharmaceutical goods, copper, and timber. When combined with country-specific tariffs, the impact on prices of goods and services can be far more severe than current levels suggest.

Figure 1: Reciprocal tariffs assigned

Figure 2: Year-to-May trade deficit by country

Market reaction remains contained despite uncertainty

US equity markets responded negatively to the tariff announcement, with the Dow Jones falling 422 points or 0.9%. The Nasdaq 100 declined by 0.8%, reflecting investor concerns about trade disruptions. Export-focused companies bore the brunt of the selling pressure. Toyota Motor's ADR declined 4% in US trading.

The VIX volatility index spiked to 18.5 before settling at 17.8, indicating heightened market anxiety. Gold prices remained relatively stable despite the uncertainty.

Currency markets showed more dramatic moves, with affected countries' currencies weakening sharply against the US dollar. The South African Rand plunged 1.95%, while the Japanese Yen and Korean Won dropped 1.2% and 1.0% respectively.

However, compared to the market's reaction in April following the Liberation Day announcements, which triggered a sell-off of over 6% and 8% in a day for the S&P 500 and Nikkei 225 indices respectively, the moves we have seen are relatively small. This suggests markets may be becoming more accustomed to flip flops in Trump's policies or welcomed the delayed implementation as this provided three more weeks for countries to negotiate.

Technical analysis reveals key market levels

The US Tech 100 index sits at a crucial technical juncture following yesterday's decline. The pullback has brought the index back to the upper boundary of its ascending channel from mid-May.

Support at 22,500 represents a critical level for the index. Failure to hold above this point could trigger a deeper correction towards 21,500 support.

A decisive rebound from current levels could see the index test the psychological resistance at 23,000. This level would represent a continuation of the recent upward trend.

Figure 3: US Tech 100 index (daily) price chart

The Japan 225 index shows a robust uptrend, trading comfortably above its 200-day simple moving average. The ascending channel's lower boundary from mid-May provides solid support around 38,930, though upside potential remains capped by the recent peak at 40,858. This technical setup suggests the index maintains bullish momentum despite short-term headwinds from tariff concerns.

Figure 4: Japan 225 index (daily) price chart

The USD/JPY pair faces a critical decision point at the 146 resistance level. This level has capped advances on three occasions over the past three months.

A break above 146 would likely propel the pair towards 148 before encountering selling pressure. This move would signal renewed dollar strength against the yen. Conversely, a decline below 142.5 could trigger a test of April's low at 139.9. Such a move would indicate tariff concerns are weighing on dollar sentiment.

Figure 5: USD/JPY (daily) price chart