Markets barely react despite steep 50% to 200% duties
U.S. President Donald Trump announced sweeping new tariffs on Tuesday, targeting copper imports with a 50% duty and pharmaceuticals with levies reaching up to 200%. Yet the market response was muted, with the S&P 500 closing flat, and the Nasdaq and Dow showing minimal movement.
The lack of immediate selloff suggests investors are either discounting the likelihood of implementation or underestimating the potential inflationary effects. Analysts warn this complacency may prove shortsighted. The tariffs could take effect within 18 months, though no firm timeline has been confirmed.
White House minimizes inflation threat
Stephen Miran, chair of Trump’s Council of Economic Advisers, downplayed concerns, likening tariff-induced inflation to rare events like meteor strikes or pandemics. “Prediction is difficult,” he told CNBC, calling higher prices a low-probability outcome. However, market observers point out that previous rounds of tariffs have led to noticeable cost increases for businesses and consumers alike.
With copper being a key material in construction, electronics, and renewable energy infrastructure, and pharmaceuticals central to healthcare supply chains, elevated import costs could ripple through core sectors of the U.S. economy.
Economic ripples abroad
Global markets are also on alert. China’s producer prices in June dropped 3.6% year over year, the sharpest decline in nearly two years, signaling potential deflationary pressures. Consumer prices, however, edged up slightly at 0.1%.
In Asia, South Korea and Japan—two major exporters—are bracing for further economic contraction. Both countries reported quarterly GDP declines, and analysts fear Trump’s tariffs could accelerate that downturn.
Retail investors stay resilient
Despite geopolitical tensions and tariff fears, global equities remain buoyant. The MSCI All Country World Index has climbed nearly 10% in 2025 so far, hitting a new record on July 4. Robinhood’s CEO told CNBC that individual investors have outperformed institutional fund managers in recent months, sticking to straightforward strategies while large firms scrambled for safe assets post-tariff announcements.
Bleakley Financial Group’s Peter Boockvar attributes the strength in ex-U.S. markets to the U.S.-led trade war itself, stating it has fueled outperformance abroad. Whether this trend continues hinges on the scale and duration of the new tariff regime—and how aggressively global partners retaliate.
