Why Markets May Ignore Trump's 10%-70% Tariff Letters

Likely frustrated by the lack of meaningful negotiations with trade partners. U.S. President Trump said he signed letters to 12 countries. The offer letters will impose taxes ranging from 10% (baseline) to 50%. The media previously reported late last week a range of as high as 70%.

Stock markets have rallied to all-time highs since April. Tariffs introduced on Liberation Day initially caused fearful investors to sell. After the President paused the tariffs, traders bet that the President would not follow through.

Markets also ignored the U.S. raising tariffs on steel and aluminum from 25% to 50%. The auto sector, which is sensitive to prices of those metals, rallied. Automotive stocks like Ford (F) jumped. Consumers bought vehicles ahead of time to avoid the risk of paying tariffs.
Ford stock gained 15.9% in the last month, while General Motors (GM) gained 7.8%.

The resource sector is also dismissing the threat of tariffs. Iron ore producer Cleveland-Cliffs (CLF) gained 18.39% last week. Copper and gold producer Freeport-McMoran (FCX) is up by 65.95% from its 52-week low. Its share price added 3.01% last week.

Your Takeaway

The U.S. currency will continue to underperform against its peers. Stock markets are not pricing in the cost of tariffs that consumers will need to pay. Similarly, its cost to suppliers is not a concern to markets. If Trump lifts the tariff pause, then the stock markets might react by panicking.