The financial markets seem to be accused for weeks to the multiple and contradictory announcements of Donald Trump in matters of customs duties, far from the panic reaction caused by the protectionist offensive of “Liberation Day” in early April. Until when?
While the American president announced on Saturday the taxation on August 1 of customs duties of 30% on products from Mexico and the European Union imported in the United States, the Old Continent scholarships only retreated Monday.
These “customs tariffs are as high as in early April”, but “the reaction of the markets is completely different”, notes Ipek Ozkardeskaya, analyst for Swissquote Bank, interviewed by AFP.
On April 4, after the announcement by Donald Trump of a burst of “reciprocal customs rights” targeting almost all trade partners in the United States, European and American scholarships had lost between 4% and 6%, unheard of since the start of the Cavid-19 pandemic in 2020.
– “TACO” –
Despite several customs announcements in recent days, aimed at more than a dozen countries and certain products such as copper, “the markets seem more and more armored,” sums up Jim Reid, economist at Deutsche Bank.
The American clues have found highest historical, while European scholarships again attract investors.
The main index of the Frankfurt Stock Exchange, the Dax, has climbed more than 20% since the start of the year.
How to explain this resilience? First, the markets have the experience of Donald Trump’s turnarounds. The entry into force of most customs taxes has been postponed several times, the time to achieve trade agreements with the countries concerned.
The financial press even gave a name for these incessant reversals, relativizing the risk for investors: the “Taco” (the initials of “Trump Always Chickens Out”, that is to say “Trump is still deflating”, editor’s note).
“Investors continue to bet on the TACO, and to the fact that the negotiations will extend,” said Ipek Ozkardeskaya.
The absence of European response at this stage has also reassured the markets. The president of the European Commission, Ursula von der Leyen, has for the moment chosen to make the round back in the hope of obtaining an agreement which would prove to be less painful.
Finally, investors took into account the fact that Donald Trump’s customs announcements are “more a tactical lever than an immediate economic threat”, abounds Stephen Innes, of Spi Asset Management, interviewed by AFP.
– “React violently” –
“The markets are waiting for negotiations to continue,” AFP Alexandre Baradez, responsible for market analysis in IG France, told AFP.
But this complacency may not last. The deadline of August 1 is scrutinized. “Unlike the latest dates that have been pushed, it looks really solid,” he said.
“If massive customs duties are really applied on August 1, in the middle of a summer hollow, the markets could react violently,” adds Jim Reid, economist at Deutsche Bank.
The effects of customs duties already implemented by the Trump administration on the American economy are also scrutinized. Customs duties, all sectors combined, are on average more than 16% at the entry of products on American soil, against less than 5% before the election of the Republican.
“We will have to monitor the next data on consumer behavior and business results, who will give an idea of the consequences of this policy on the economy,” said Alexandre Baradez.
The markets fear in particular that customs duties will increase the risk of “stagflation”, that is to say an economic slowdown coupled with an outbreak of inflation, which would prevent the American Federal Reserve (Fed) from lowering its rates to revive activity.
“The lack of reaction from the markets increases the gap between the way investors want to see reality and what economic reality will look like,” warns Ipek Ozkardeskaya.
Posted on July 14 at 4:50 p.m. AFP
