The latest news on the tariffs front is that the EU is reportedly prepared to accept a flat 10% tariff rate by US under certain conditions. The EU has been the most difficult one to deal with and Trump at some point tried to force them to speed up negotiations with a 50% tariff threat.
From a market perspective, tariffs are no longer that much of a deal because a 10% average tariff rate has been already priced in. We also got reports from businesses that they plan with a 10% to 20% tariff rate. But what about the July 8th deadline that was set back in April for trade talks?
US Treasury Secretary Bessent recently said that the deadline can be extended for countries negotiating in good faith with the US. Therefore, the deadline doesn’t matter anymore.
So, we are left with the markets continuing to price in better global growth ahead. There are many positive drivers including trade deals eventually getting done, expansionary fiscal policies and central bank easing.
One risk for the growth picture could be the failure of the Trump’s bill. That would trigger a repricing in growth expectations and weigh on risk assets. But for now, there is very low probability of the bill not passing.
The other risk to keep an eye on is inflation. Although we are still seeing disinflation in the data, keep in mind that inflation is a lagging indicator.
