Why didn’t the markets react strongly to Trump’s latest call for EU tariffs?

CGTN Europe interviewed Marc Ostwald, Chief Economist & Global Strategist, ADM ISI

Transcript

00:00Mark Oswald from ADM Investor Services International joins us now.

00:04You know, Mark, I'm just wondering, are the markets starting to not second-guess Donald Trump,

00:11but get the measure of the man? And is that why we're seeing a more muted response?

00:16To a certain extent, I think markets are definitely getting used to this back and forth

00:21that is very typical of pretty much any bit of policy implementation

00:27from the new U.S. administration.

00:31It's also the realization that the back and forth doesn't actually change anything materially,

00:37and it's better to wait and react to what is actually implemented from a long-term basis

00:45rather than a short-term perspective, and then evaluate it then as needed.

00:53Of course, come the beginning of July, when all these deals with so many different countries

00:58are meant to be concluded, and as Tony Waterman made the point a little earlier,

01:04these deals can normally take years, not a matter of weeks.

01:07Do you expect the market to go into a jittery cycle again?

01:11As we get closer to particularly the lifting of the 90-day moratorium on reciprocal tariffs,

01:21yes, I would imagine without, you know, unless there are material movements in trade negotiations

01:28with the bigger countries or blocs, EU, Japan, South Korea, most notably,

01:34then markets will start to get nervous about whether they're going to be extended or not.

01:41The primary assumption is, above all with the negotiations with China,

01:46is there's almost an assumption of an automatic extension

01:50because markets acknowledge how complex that is.

01:55Let's move away from tariffs and focus on this big, beautiful tax bill.

02:01It's making its way towards being finalized.

02:07If it goes ahead, what market reaction do you expect to see?

02:13Well, I think markets are basically assuming that whatever comes out of this

02:18and the Senate proposals in terms of changing what was passed in the House of Representatives

02:25assume even bigger tax and spending cuts,

02:31which will probably have an even bigger material negative impact on the U.S. budget outlook.

02:38So markets are anticipating that they will need to continue to pressure U.S. bond yields higher.

02:45And over time, obviously, that long-term, the higher long-term interest rates,

02:51which one would have to add is not just the phenomenon in the U.S.,

02:55but also above all in Japan, to a certain extent in the Eurozone.

03:02You know, that is something that they're going to have to factor in,

03:05and that will have a negative impact on corporate earnings over the longer run.

03:12Thank you so much for chatting to us today.

03:13That, of course, is Mark Oswald.

03:15He is from ADM Investor Services International.