Navigating Tariff Threats: Market Reactions and Future Expectations

Trump extended his Liberation Day tariff deadline to August 1st, giving countries three extra weeks to strike deals with the US, but by Tuesday morning, Trump said there would be no further extensions reaffirming that tariffs would take effect on that August 1st date.

His administration continues to send formal warnings to foreign officials detailing new duties.

Now the market does remain on edge, but we are looking at US stock features.

Actually, US futures stocks higher this morning.

Well, joining me to weigh in is Patrick Healy, president and CIO of Caliber Financial Partners.

Patrick, good morning.

Thank you so much for joining me.

So after the S&P 500 and Nasdaq hit record highs at the end of last week, we saw lower closes on Monday as well as Tuesday.

So how are Trump's tariff threats likely to impact markets in the coming weeks?

Well, I think the market has gotten used to the Trump administration's negotiation style a little bit, right?

We're seeing more muted responses now as opposed to the violent reaction back in April during Liberation Day and sort of the wild swings that we saw when tariffs were put on or the threat of tariffs were put on and then pulled back.

So I do think that the market is kind of used to.

His style, so to speak, and that, you know, even the threats that are floated in the press are not necessarily permanent and are being used as a negotiation tactic and so you're seeing that in a much more muted response.

I do think that the market is looking for an excuse to rally and you know if we can get some of these trade deals inked as Secretary Besson has suggested earlier in the week, then I think that will give some jet fuel to the market to trade higher.

Yeah, and Patrick, just building on what you just said yesterday, Trump also announced a 50% tariff on copper imports and threatened to slap pharma with tariffs as high as 200%.

But in terms of sectors for the markets, what are most vulnerable to some of these potential trade policies and which sectors do you think could benefit?

Sure, well, with, with respect to copper, I think that one has the potential for widespread implications.

Copper is used in Anything from semiconductors to data centers to automobiles and some of those imports, those industries rely on heavily and it's not as if we can just turn a switch and start mining copper in the United States.

I think that's has a big ramp up and it's a limited resource.

And so I think it's somewhat unrealistic to think that we're just going to onshore copper manufacturing or mining, I should say.

Um, I also think that that that tariff threat is going to get pulled back.

I don't think when cooler heads prevail that that is something that will benefit the United States and it will impact a lot of the industries I just mentioned.

Pharma is an obvious, you know, impact.

I don't think there's any chance that he's going to put 200% tariffs on the pharma industry.

I do think it makes sense from a national.

Security standpoint to try and onshore some of that.

But again, it takes a lot of time and some of the industries that are impacted by that we'll have to demonstrate some goodwill that they're making efforts to do it.

I, I suspect that gets pulled back as well.

And later on this afternoon, we will be getting the Fed meeting minutes and this does come ahead of the July meeting, of course, and it has been fairly quiet on the economic calendar this week in the US, but last week we got a slew of labor market figures and next week we will be getting inflation data.

So how are interest rate expectations shifting as we head into the second half of 2025?

So you know it's interesting that the Fed is using as its justification for keeping rates steady, the expectation for higher inflation.

We haven't really seen that reflected in the data yet.

At the same time they're looking for confirmation of weakness in the jobs report in order to, you know, provide more accommodation.

So you know that's their dual mandate.

So they're looking and leaning on expectations on inflation on one side.

But looking for confirmation on the job market side before they're willing to move.

I suspect that the administration is going to continue to ramp up pressure on Chair Powell.

Um, the meeting for July is at the end of the month, a day or two before those August 1st tariff deadlines expire.

And so I think some of it will depend on the inflation print next week.

Some of it will depend on whether some of those trade deals get announced and inked in advance of that Fed meeting, and it may give them some motivation to cut rates at the end of July, but I suspect it's probably going to be in September, the first one.

And finally, Patrick, before I let you go, do you think this is a good time to be defensive and do you think there are hidden opportunities out there given what we're seeing?

And finally, what are you telling clients right now about risk management?

Right, so I actually I'm quite bullish going into the end of the year.

I think that, you know, the biggest impact on the markets to kind of take the next leg up is is interest rate cuts.

If we get a couple of them in the second half of the year, I think that provides some momentum going into 2026.

By then, hopefully the tariff discussion is in the rearview, and we could refocus on.

Sort of pro-growth initiatives.

I think the bill getting passed in the House and Senate and then ink by the President on the 4th of July will provide some Uh, some growth initiatives going forward, some tax incentives.

I think that's a good thing.

I do think that again the tariff threats, the market's reacting differently than it did in April, and they're looking for an excuse to rally, and there's still a lot of capital on the sidelines.

So we got a couple of rate cuts, the tariff deals get inked.

I think there's a lot of sort of tailwinds heading into the end of the year and next year.

OK, Patrick, well, we will have to leave it there, but thank you so much for joining me and as always, thank you so much for sharing your perspective.