The New Normal of US Tariff Policy: How Should Traders Adjust Their Strategies?
2025-08-13 19:59:33
Given the current situation of ample liquidity, relatively strong resilience of the U.S. economy, significant growth in tariff revenue, appeasement strategies adopted by trading partners, and a relatively favorable domestic political environment in the United States, some analysts believe that the probability of further escalation of global trade frictions has increased significantly.
US stocks are currently trading at or near historical highs, and market volatility has fallen to multi-year lows, as traders have gradually adapted to the tariff news from past rounds of trade friction. The US stock market's response to tariff adjustments has gradually stabilized. While the "Trump option" was repeatedly exercised during market declines, the hint of a 15%-20% across-the-board tariff increase is no longer seen as a threatening ceiling, but rather as the market adapting to a new normal. This change indicates that price sensitivity to new tariff shocks has significantly decreased, risk premiums have compressed in the short term, and the market's room for response to policymakers is showing signs of easing. With weakening market constraints, US policymakers have more room to maneuver, and the threshold for escalating trade frictions has also been lowered.
US GDP rebounded to 0.7% quarter-on-quarter in the second quarter, and third-quarter GDP growth also showed positive signs. Although some analysts project US economic growth to slow to 1.8% in 2025, it will still exceed that of most developed economies, and the 2026 growth rate has been revised upward to 2.1%. Despite a significant increase in US tariffs, they have not yet reached the level of an embargo, and the impact on US output and inflation has been slow and delayed. This means that the US is not at risk of a "hard landing" in the short term, and policymakers can find a relatively balanced balance between economic growth and inflation, providing policy space to continue to pressure trading partners.
U.S. customs revenue reached a record $66 billion in the second quarter, with an additional $28 billion added in July. This compares to an average monthly revenue of only around $7 billion in the same period last year. With the budget deficit remaining high, tariff revenue provides a degree of marginal self-financing for the United States. While tariff revenue is not a long-term solution, it can provide funding for a tougher trade stance. This move has eased fiscal supply pressures in the short term, particularly driven by the reshoring of manufacturing and infrastructure investment. The interaction between economic growth and inflation will further influence market interest rate pricing.
Despite facing pressure from multiple trade frictions, the United States has remained cautious, avoiding undermining multilateral trade rules and supply chain stability. Instead, most economies have opted to mitigate these tensions by investing in the United States and lowering import tariffs. Bilateral negotiations between the United States and other countries have gradually formed a "dual trade system," widening tariff gaps within certain regions. This has helped the United States improve its relative trade conditions and further narrow its annual trade deficit. The United States has thus gained a competitive advantage in its bilateral relations with various countries, forcing some to make further concessions in cooperation and strengthening its trade stance.
Currently, the US President's approval rating within his own party is high, at approximately 90%. Furthermore, the US government has strengthened its political capital after passing the "Big, American" bill, and faces less political pressure ahead of the 2026 midterm elections. This political backdrop creates a favorable window for escalating trade frictions. In the short term, policy risks are more oriented toward "long tariffs." However, under relatively stable political circumstances, this policy risk could continue to escalate in the form of "unilateral tariffs."
US tariffs have risen significantly since 2016, reaching 18.6%, exceeding the projected 2.5% by the end of 2024 and 1.5% in 2016, and approaching the historical highs of the 1930s. This change is expected to result in a downward revision of global economic growth by 0.4 percentage points to 3.0%, with the US experiencing a greater impact, with economic growth expected to decline by 0.9%. However, reindustrialization and investment repatriation in the US may gradually mitigate this impact. The impact on the European economy is expected to be relatively mild, decreasing by 0.4 percentage points. In response to the downward revision of global economic growth, markets will begin to reassess growth expectations and risk premiums, particularly in the repricing of inflation and interest rates, making the market more sensitive to the risk compensation of different asset classes.
Traders are closely monitoring several key risk indicators, including the progress of tariff expansion and unified tariff rate implementation, monthly changes in US tariff revenue and import substitution, and whether trading partners are shifting from bilateral to multilateral retaliation. Furthermore, the speed of inflation transmission and the Federal Reserve's response, as well as the language regarding tariffs and cost shifting in corporate earnings guidance, are also key market concerns.
Overall, the core of market pricing logic lies not in whether or not tariffs will escalate, but rather in the pace and intensity of the escalation, as well as the market's marginal sensitivity to tariff shocks. During periods of relaxed market constraints and a favorable political environment, the risk of escalating trade frictions is more likely to manifest itself in a "event-driven" fashion, while fundamentals absorb it.
Weakening market constraints and expanding policy risk-taking space
US stocks are currently trading at or near historical highs, and market volatility has fallen to multi-year lows, as traders have gradually adapted to the tariff news from past rounds of trade friction. The US stock market's response to tariff adjustments has gradually stabilized. While the "Trump option" was repeatedly exercised during market declines, the hint of a 15%-20% across-the-board tariff increase is no longer seen as a threatening ceiling, but rather as the market adapting to a new normal. This change indicates that price sensitivity to new tariff shocks has significantly decreased, risk premiums have compressed in the short term, and the market's room for response to policymakers is showing signs of easing. With weakening market constraints, US policymakers have more room to maneuver, and the threshold for escalating trade frictions has also been lowered.
US fundamentals provide a buffer, and tariff impact is delayed
US GDP rebounded to 0.7% quarter-on-quarter in the second quarter, and third-quarter GDP growth also showed positive signs. Although some analysts project US economic growth to slow to 1.8% in 2025, it will still exceed that of most developed economies, and the 2026 growth rate has been revised upward to 2.1%. Despite a significant increase in US tariffs, they have not yet reached the level of an embargo, and the impact on US output and inflation has been slow and delayed. This means that the US is not at risk of a "hard landing" in the short term, and policymakers can find a relatively balanced balance between economic growth and inflation, providing policy space to continue to pressure trading partners.
Fiscal incentives are enhanced, and tariffs become a financing tool
U.S. customs revenue reached a record $66 billion in the second quarter, with an additional $28 billion added in July. This compares to an average monthly revenue of only around $7 billion in the same period last year. With the budget deficit remaining high, tariff revenue provides a degree of marginal self-financing for the United States. While tariff revenue is not a long-term solution, it can provide funding for a tougher trade stance. This move has eased fiscal supply pressures in the short term, particularly driven by the reshoring of manufacturing and infrastructure investment. The interaction between economic growth and inflation will further influence market interest rate pricing.
External constraints are weak and bilateral pressure is increasing
Despite facing pressure from multiple trade frictions, the United States has remained cautious, avoiding undermining multilateral trade rules and supply chain stability. Instead, most economies have opted to mitigate these tensions by investing in the United States and lowering import tariffs. Bilateral negotiations between the United States and other countries have gradually formed a "dual trade system," widening tariff gaps within certain regions. This has helped the United States improve its relative trade conditions and further narrow its annual trade deficit. The United States has thus gained a competitive advantage in its bilateral relations with various countries, forcing some to make further concessions in cooperation and strengthening its trade stance.
The political environment is conducive to the escalation of trade frictions
Currently, the US President's approval rating within his own party is high, at approximately 90%. Furthermore, the US government has strengthened its political capital after passing the "Big, American" bill, and faces less political pressure ahead of the 2026 midterm elections. This political backdrop creates a favorable window for escalating trade frictions. In the short term, policy risks are more oriented toward "long tariffs." However, under relatively stable political circumstances, this policy risk could continue to escalate in the form of "unilateral tariffs."
Global economic impact and market response
US tariffs have risen significantly since 2016, reaching 18.6%, exceeding the projected 2.5% by the end of 2024 and 1.5% in 2016, and approaching the historical highs of the 1930s. This change is expected to result in a downward revision of global economic growth by 0.4 percentage points to 3.0%, with the US experiencing a greater impact, with economic growth expected to decline by 0.9%. However, reindustrialization and investment repatriation in the US may gradually mitigate this impact. The impact on the European economy is expected to be relatively mild, decreasing by 0.4 percentage points. In response to the downward revision of global economic growth, markets will begin to reassess growth expectations and risk premiums, particularly in the repricing of inflation and interest rates, making the market more sensitive to the risk compensation of different asset classes.
Risk Monitoring and Triggers
Traders are closely monitoring several key risk indicators, including the progress of tariff expansion and unified tariff rate implementation, monthly changes in US tariff revenue and import substitution, and whether trading partners are shifting from bilateral to multilateral retaliation. Furthermore, the speed of inflation transmission and the Federal Reserve's response, as well as the language regarding tariffs and cost shifting in corporate earnings guidance, are also key market concerns.
Conclusion
Overall, the core of market pricing logic lies not in whether or not tariffs will escalate, but rather in the pace and intensity of the escalation, as well as the market's marginal sensitivity to tariff shocks. During periods of relaxed market constraints and a favorable political environment, the risk of escalating trade frictions is more likely to manifest itself in a "event-driven" fashion, while fundamentals absorb it.
- Risk Warning and Disclaimer
- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
