Trump threatens to impose 50% tariffs on Brazil, US stocks are generally positive, and the US dollar remains stable
2025-07-10 18:31:22
On Thursday (July 10), Trump announced a new round of tariffs on Brazil and several small countries. However, as Nvidia pushed the stock market higher and its market value exceeded $4 trillion, the market showed only mild risk aversion. The minutes of the Federal Reserve meeting dispelled expectations of a rate cut in July, and the dollar was supported as doves were in the minority.
Trump is stuck in tariff mode
The original deadline of July 9 for reciprocal tariffs passed without any sign of a new trade deal, and all hopes now rest on a new date of August 1. The EU is racing to finalize a deal with the United States, with intense discussions on reducing tariffs on cars, a vital industry for the bloc.
Japan is also desperately trying to break an impasse in trade talks, with negotiators working to arrange a face-to-face meeting with Trump administration Treasury Secretary Scott Bessant.
However, the chances of a deal with India looked increasingly remote after Trump this week launched a tirade against the BRICS bloc, of which India is a member.
Sector-specific tariffs also took center stage again, with the president confirming late yesterday that a 50% tariff on copper imports will take effect on August 1.
Brazil under attack from Trump
But this was not the only development overnight. Trump had just threatened to impose a 50% tariff on Brazil and relatively lower tariffs on several smaller trading partners. Brazil was not included in the reciprocal tariff list announced on April 2 and was only subject to a general tariff of 10%. However, the United States currently has a trade surplus with Brazil, so the move to impose a tariff of up to 50% on Brazil is more surprising.
The decision appeared to be politically tinged rather than based purely on trade considerations, as Trump demanded that Brazilian President Lula da Silva end his "political persecution" of former President Jair Bolsonaro.
Trump considers Bolsonaro his "close friend" and is unhappy with the way the Brazilian judicial system treats Bolsonaro over allegations of an attempted coup in 2022. But da Silva did not give in and said he would take countermeasures.
Other countries affected by Trump's latest announcement include Iraq, Libya, Algeria and Sri Lanka, which will face tariffs of 30%; Brunei and Moldova, which will be subject to tariffs of 25%; and the Philippines, which will be subject to tariffs of 20%. All of these tariffs will take effect from August 1.
The stock market is generally positive, and the reaction to Trump's tariff policy is flat
However, other than the Brazilian real, which fell more than 2%, and Brazil's benchmark stock index, which fell slightly by 1.3%, the reaction elsewhere was muted. Gold rose slightly for a second day, but this was more likely due to the dollar's recent rebound momentum fading.
Investors may believe that these high tariffs will not be permanent and, more importantly, believe that the United States will eventually reach agreements with larger trading partners such as the European Union, Japan and India.
As a result, stocks were broadly higher today, with Wall Street hitting all-time highs yesterday as it shrugged off Trump's latest threats. However, only the Nasdaq Composite closed at a record high, while the Russell 2000 hit its highest level since late February, when the trade war first began.
In addition to ongoing trade uncertainty, diminished expectations for a sharp rate cut by the Federal Reserve have kept the market somewhat cautious, curbing the surge in risk assets. But this does not seem to apply to artificial intelligence-related stocks, with Nvidia leading the gains, closing at a record high of $162.88 on Wednesday. Earlier in the day, Nvidia's market value briefly exceeded $4 trillion, becoming the first company to reach this milestone.
Dollar fluctuates in a narrow range
The Federal Reserve released the minutes of its June policy meeting yesterday. Despite recent speculation that divisions within the Federal Open Market Committee (FOMC) are growing, most officials still agree with the consensus of further easing policies this year. Currently, those officials who are more concerned about the downside risks of the labor market and those who are more concerned about the upside risks of inflation are still in the minority.
The dollar index was slightly weaker today after hovering near a two-week high yesterday. The possibility of a rate cut in July was largely ruled out after the release of the minutes, but expectations for cumulative rate cuts through 2025 did not change much. Later today, the market focus will be on weekly initial jobless claims data.
Trump is stuck in tariff mode
The original deadline of July 9 for reciprocal tariffs passed without any sign of a new trade deal, and all hopes now rest on a new date of August 1. The EU is racing to finalize a deal with the United States, with intense discussions on reducing tariffs on cars, a vital industry for the bloc.
Japan is also desperately trying to break an impasse in trade talks, with negotiators working to arrange a face-to-face meeting with Trump administration Treasury Secretary Scott Bessant.
However, the chances of a deal with India looked increasingly remote after Trump this week launched a tirade against the BRICS bloc, of which India is a member.
Sector-specific tariffs also took center stage again, with the president confirming late yesterday that a 50% tariff on copper imports will take effect on August 1.
Brazil under attack from Trump
But this was not the only development overnight. Trump had just threatened to impose a 50% tariff on Brazil and relatively lower tariffs on several smaller trading partners. Brazil was not included in the reciprocal tariff list announced on April 2 and was only subject to a general tariff of 10%. However, the United States currently has a trade surplus with Brazil, so the move to impose a tariff of up to 50% on Brazil is more surprising.
The decision appeared to be politically tinged rather than based purely on trade considerations, as Trump demanded that Brazilian President Lula da Silva end his "political persecution" of former President Jair Bolsonaro.
Trump considers Bolsonaro his "close friend" and is unhappy with the way the Brazilian judicial system treats Bolsonaro over allegations of an attempted coup in 2022. But da Silva did not give in and said he would take countermeasures.
Other countries affected by Trump's latest announcement include Iraq, Libya, Algeria and Sri Lanka, which will face tariffs of 30%; Brunei and Moldova, which will be subject to tariffs of 25%; and the Philippines, which will be subject to tariffs of 20%. All of these tariffs will take effect from August 1.
The stock market is generally positive, and the reaction to Trump's tariff policy is flat
However, other than the Brazilian real, which fell more than 2%, and Brazil's benchmark stock index, which fell slightly by 1.3%, the reaction elsewhere was muted. Gold rose slightly for a second day, but this was more likely due to the dollar's recent rebound momentum fading.
Investors may believe that these high tariffs will not be permanent and, more importantly, believe that the United States will eventually reach agreements with larger trading partners such as the European Union, Japan and India.
As a result, stocks were broadly higher today, with Wall Street hitting all-time highs yesterday as it shrugged off Trump's latest threats. However, only the Nasdaq Composite closed at a record high, while the Russell 2000 hit its highest level since late February, when the trade war first began.
In addition to ongoing trade uncertainty, diminished expectations for a sharp rate cut by the Federal Reserve have kept the market somewhat cautious, curbing the surge in risk assets. But this does not seem to apply to artificial intelligence-related stocks, with Nvidia leading the gains, closing at a record high of $162.88 on Wednesday. Earlier in the day, Nvidia's market value briefly exceeded $4 trillion, becoming the first company to reach this milestone.
Dollar fluctuates in a narrow range
The Federal Reserve released the minutes of its June policy meeting yesterday. Despite recent speculation that divisions within the Federal Open Market Committee (FOMC) are growing, most officials still agree with the consensus of further easing policies this year. Currently, those officials who are more concerned about the downside risks of the labor market and those who are more concerned about the upside risks of inflation are still in the minority.
The dollar index was slightly weaker today after hovering near a two-week high yesterday. The possibility of a rate cut in July was largely ruled out after the release of the minutes, but expectations for cumulative rate cuts through 2025 did not change much. Later today, the market focus will be on weekly initial jobless claims data.
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