Global markets ignore Trump’s tariff letters, only Wall Street reacts on higher-for-longer rate fears

Avoiding a tariff hit during the shopping-heavy end-of-year period could avert the worst of any adverse headlines for the White House, a prospect analysts foresaw in May after gauging the impact of Trump’s initial round of tariffs.

US President Donald Trump’s sweeping tariffs order on 14 countries, issued overnight, failed to move the needle on the global market sentiment as investors shrugged off concerns. According to experts, Trump’s playbook of ratcheting up tension before dialling back  seems to be intact.

Trump issued letters to multiple countries outlining new tariff levels, which range from 25 percent for Japan, South Korea, Malaysia and Kazakhstan to 30 percent for South Africa and 40 percent for both Laos and Myanmar.

“Further trade volatility seems inevitable, but not terribly significant. The Trump administration appears to retain its escalate-to-de-escalate approach and has demonstrated a willingness to shock the market with tariff demands that he later modifies,” said Vikram Kasat, head, advisory, PL Capital.

More and more, the acronym TACO (Trump Always Chickens Out) seems to hold weight for investors. The letters sent by Trump are not an executive order, signed into law, especially since the tariff deadline was pushed to August 1, instead of July 9, 2025.

Further, Trump has opened the US for trade deals, ensuring that the markets do not consider these letters as the final iteration of the tariffs imposed. Among the countries, South Korea, Indonesia, Thailand and Malaysia have reached out for talks for which the US seems open to, while China allies Laos, Cambodia and Myanmar face hefty tariffs with little respite.

However, Asian investors, especially those in South Korea and Japan, took the tariff updates in their stride. The benchmark indices, Nikkei 225 for Japan and Kospi for South Korea, failed to react, instead settling with gains. Even the MSCI AC Asia Pacific index closed higher.

Only America’s Wall Street was jittery. The Nasdaq Composite, S&P 500 and the Dow Jones Industrial Average sank almost 1 percent overnight, largely on fears of imported inflation and higher-for-longer rates.

On the domestic front, textile stocks cheered the development, while the benchmarks largely ignored the update. With the imposition of 35 percent tariffs on Bangladesh, locally manufactured textile exports become more competitive in comparison in global markets.

In the US ready-made garment market, Vietnam holds a 19 percent share, while Bangladesh accounts for 9 percent and India follows with 6 percent.

While the announced tariff on Bangladesh has been slightly reduced from the 37 percent rate declared in April, it remains significantly above the base rate of 10 percent. Negotiations are still possible until the new tariffs take effect on August 1.

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