Remembering the downsides to tariffs

A look at the day ahead in European and global markets

By Wayne Cole, Chief Correspondent, Treasury

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Asian markets have been quietly picking up the pieces after the U.S./EU tariff party turned into a bust. It was like being relieved because somebody only burned half your house down. Hey, at least they left the kitchen and the bathroom.

European stock futures are fractionally firmer and the single currency has steadied just under $1.1600. The euro's rapid retreat was not entirely a surprise given how crowded the long euro/short dollar trade had got, and the suspicion is speculators will soon be selling the dollar again.

U.S. President Donald Trump meets with European Commission President Ursula von der Leyen in Turnberry, Scotland July 27, 2025. REUTERS/Evelyn Hockstein/File Photo

After all, come Friday U.S. consumers will be paying a minimum of 15% on all imports into the country, and for the foreseeable future.

This tax will squeeze demand and profit margins at home, while eating into export earnings across the globe. These are called beggar thy neighbour policies for a reason.

There's also the rather naive notion that such "deals" guarantee a period of certainty ahead. Just look how Trump suddenly gave Russia 10 to 12 days to move on a ceasefire with Ukraine, having set a deadline of 50 days earlier this month.

This did not seem in any way planned. Trump just said it off the cuff at a media conference at his golf club in Scotland. If such a deadline can be changed on a whim, who's to say anything agreed in these trade deals cannot be altered at his pleasure.

Trump has seen how trade and tariffs can dominate the global news cycle; there's no way he's giving that up anytime soon.

Talks with China, for instance, are set to continue in Stockholm today and everybody assumes the deadline for an agreement will be extended by another 90 days. This, entirely incidentally, will allow time for Trump to meet Chinese President Xi Jinping and personally claim yet another biggest deal of all time.

For its part, Wall St remains in a world of its own, counting on upbeat results from megacaps this week to justify valuation measures that are the highest since the late 1990s. Meta and Microsoft are due on Wednesday, Apple and Amazon the day after. A slew of European companies also report earnings today.

Graphics are produced by Reuters.

Graphics are produced by Reuters.

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