Markets Unmoved by Trump Tariff Threats, but Bond Investors Show Caution

European markets appeared largely indifferent to Donald Trump’s latest threat to impose 30% tariffs on EU and Mexican imports starting in August. Despite the potential implications, the euro and eurozone stock indices experienced only slight declines on Monday. Analysts suggest that the timing—coinciding with France’s Bastille Day holiday, and the skepticism surrounding the implementation of the tariffs may be muting investor reactions for now.

While markets have learned not to take Trump’s tariff pronouncements at face value, bond markets reacted more nervously. Heightened political attacks on Federal Reserve Chair Jerome Powell by the White House have raised investor concerns about the future independence of central banks in both the U.S. and the UK. Mike Peacock, formerly of the Bank of England, warned that the BoE is also increasingly vulnerable to political pressure.

Meanwhile, the European Union is not sitting idle. Italy’s Foreign Minister Antonio Tajani stated that the EU has already drawn up a 21-billion-euro tariff list in preparation for potential retaliation if negotiations with the U.S. fail. Still, the EU has extended its suspension of countermeasures until early August in hopes of reaching a negotiated settlement.

Elsewhere, markets are also monitoring Japan’s post-election monetary stance. With opposition parties favoring tax cuts and loose monetary policy, the Bank of Japan could come under political pressure to maintain lower interest rates. This adds to global unease about central bank autonomy in a tense geopolitical environment.

Commodities markets also remain in focus. U.S. corn exports are expected to hit a record high for the 2024-25 season, slightly surpassing 2020-21 levels. However, agricultural analysts warn of caveats, possibly related to global demand or logistical challenges. Oil markets, despite geopolitical headwinds, have stayed resilient so far in 2025 but may soon face downward pressure as Saudi production rises while demand softens.

Source: Reuters