20 November 2024

Investor unease as US extends deadline for reciprocal import tariffs, giving nations more time to reach trade deals.

By Gary Jackson,

Head of editorial, FE fundinfo

US president Donald Trump has delayed the implementation of reciprocal tariffs tied to his ‘Liberation Day’ trade framework until 1 August, giving trading partners additional time to make deals but adding more uncertainty to the market.

The tariffs, originally announced on 2 April, included a 10% blanket duty on all imports and a second tier of ‘reciprocal’ tariffs targeting specific countries. The second tier was suspended for 90 days, set to expire 9 July but the White House confirmed the pause has now been extended by three weeks.

Letters from the US administration were sent in recent days to countries including Japan, South Korea, Malaysia, South Africa and Kazakhstan. The letters warned that tariffs could take effect on 1 August if trade negotiations fail to deliver deals.

Some proposed rates exceed 25%, with certain sectors reportedly facing potential levies as high as 70%.

The revised timeline does not change the tariff structure or targets. Instead, it provides governments more time to negotiate exemptions. While deals have been reached with China, Vietnam and the UK, talks with European Union members and several Asian economies remain unresolved.

Matt Britzman, senior equity analyst at Hargreaves Lansdown, said: “Trump lit the fuse on tariff fears again last night, leaving investors bracing for fresh volatility.

“Wall Street was the first to react last night, with major indexes sliding over 1% as the tariff news hit the reels. After recent all-time highs for the S&P 500 and Nasdaq, the new 1 August tariff deadline and fears of skipped negotiations have markets on edge, especially with the US-China trade deal still hanging in the balance.”

European markets showed a more restrained response compared to Wall Street. The FTSE 100 edged higher and remained near record levels seen the previous month, as investors weighed whether the deadline extension would ease immediate trade pressures.

“There’s clearly a desire from the White House to get deals done, reflected in the latest extension of the tariff deadline,” Britzman said. “Investors are still digesting the latest developments, with US futures suggesting a claw back of some of yesterday’s losses.”

Market volatility, as measured by the VIX index, briefly rose following the tariff announcement but stayed well below peaks reached in April. The relatively moderate reaction suggests investors may be becoming more accustomed to shifts in US trade policy.

Please Note:

This article is provided for information only. The views of the author and any people quoted are their own and do not constitute financial advice. The content is not intended to be a personal recommendation to buy or sell any fund or trust, or to adopt a particular investment strategy. However, the knowledge that professional analysts have analysed a fund or trust in depth before assigning them a rating can be a valuable additional filter for anyone looking to make their own decisions. Past performance is not a reliable guide to future returns. Market and exchange-rate movements may cause the value of investments to go down as well as up. Yields will fluctuate and so income from investments is variable and not guaranteed. You may not get back the amount originally invested. Tax treatment depends of your individual circumstances and may be subject to change in the future. If you are unsure about the suitability of any investment you should seek professional advice. 

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