Stocks felt a sudden chill after President Donald Trump launched the latest assault in his trade war. The question for investors is whether the market will now shake it off or catch a cold.
The White House sent letters to more than a dozen countries on Monday, threatening tariff rates of between 25% and 40%. The optimistic take is that stocks’ reaction was relatively small compared with the first
announcement of across-the-board tariffs in early April. Back then the major indexes fell about 5% the day after, whereas yesterday the drop was less than 1%.
There are a few possible explanations. It could be expectations that more deals will be reached ahead of the new Aug. 1 deadline, or that Trump might eventually back down. Some may be thinking that the effect of tariffs won’t be too bad because they haven’t had a big impact so far.
But there’s also a case that investors have become too complacent. It’s true that tariffs have yet to stunt economic growth, spark a burst in inflation, or decimate company earnings. But the real test is yet to
come.
Investors know that, one way or another, tariffs will reduce corporate profits. They just don’t know yet whether the damage will be large or small. Second-quarter earnings season, which begins in earnest next week, may reveal what executives are now expecting.
So far, it seems companies are taking tariffs on the chin. Maybe they were able to stockpile imports before the levies to save on costs, but the fact that consumer-price inflation hasn’t taken off suggests they’re eating most of the higher costs—rather than passing them on to consumers. Amazon’s Prime Day this week shows the retailer is eager to keep prices low. Trump famously told Walmart not to raise prices. Maybe Amazon got the same message.
But this golden period of low tariffs and low prices isn’t sustainable. Either companies pass on more of the costs, or they lose profit—which eventually leads to job
losses. Both scenarios dent demand. Over the long run, the strength of that blow will decide whether the tariff sniffles leave stocks bedridden.
—Brian Swint
|
CONTENT FROM: Blackstone
|
Build with Blackstone
|
.jpg)
|
|
Nearly 90% of companies are privately owned. Partner with Blackstone and help
your clients build wealth with private markets.
LEARN MORE
|
|
|
U.S. Imports Have Already Sharply Shifted Away From China
As President Donald Trump officially postponed the date when his so-called
reciprocal tariffs kick in to Aug. 1, and issued letters to about a dozen countries unilaterally setting tariff rates on their products of between 25% and 40%, the data reveal a dramatic shift in tech device imports away from China.
- China accounted for 8% of U.S. smartphone imports in May, according to new Census Bureau data, down from 67% in May 2024. As recently as February, a majority of U.S. smartphone imports came from China. U.S. importers currently pay a 20% tax on smartphones, PCs, and parts from China.
- For now, those levies are zero from the rest of the world, giving companies a strong incentive to move their exports to the U.S. away from China. The Trump administration is adding new tariffs back on various countries, though exemptions for certain tech products remain in place.
- For now, the shift away from China has benefited India, where Apple has spent years building up iPhone assembly, and Vietnam where Samsung has done the same. India was the top smartphone exporter to the U.S. in May, with Vietnam a close second.
- American businesses positioned
ahead of tariffs in the first quarter, with smartphone imports up 72% from a year earlier. But a “pull-forward” of demand means that smartphone shipments to the U.S. subsequently declined 29% in May. Smartphone shipments to the U.S. from China fell $2.6 billion in May.
What’s Next: The Trump administration has warned of additional sector-specific tariffs later this year. Tech
supply chains haven’t seen much movement in servers and related parts. Taiwan and Mexico remained the leading exporters of those products to the U.S. in May.
—Adam Levine
Extended Amazon Prime Day Could Boost Summer Spending
Amazon has stretched its annual Prime Day sale over four days this year, setting up an intense battle with fellow retailers that is expected to generate the sales equivalent of two Black
Fridays, according to Adobe analytics. Prime Day starts today and runs through Friday in 20 countries.
- It could generate more than $21 billion
in gross merchandise value, 60% higher than last year, estimated BofA Securities analyst Justin Post. It could deliver record-breaking sales, reinforce Amazon’s competitive advantage, and boost retail and advertising revenue, wrote Tigress Financial Intelligence chief market strategist Ivan Feinseth.
- Rivals including Walmart, Target, Best Buy, REI, Kohl’s, and Dollar General have accelerated their own summer promotions, trying to siphon off Amazon’s sales. Target’s Circle Week runs through Saturday; Walmart’s deals continue through Sunday.
- From July 8 to 11, U.S. retailers are expected to drive a record $23.8 billion in online spending, up 28.4% from 2024, Adobe analytics estimates. Adobe expects
discounts of 10% to 24%, especially on apparel, appliances, mattresses, TVs, computers, and toys.
- Prime Day doesn’t just drive sales, it spurred millions of customers to sign up for Prime memberships in the three weeks before the 2024 event. Amazon CEO Andy Jassy told CNBC last week that he expects shoppers will welcome the longer event, especially amid worries about trade and prices.
What’s Next: The competing sales coincide with the start of back-to-school shopping season. Consumers also could be enticed to make some higher-ticket purchases that they had postponed because of tariff-related anxieties.
—Sabrina Escobar and Janet H. Cho
MicroStrategy Pauses Bitcoin Buying, as Chairman Says ‘Hold On’
MicroStrategy didn’t buy any Bitcoin between
