Traders working on the New York Stock Exchange
U.S. President Donald Trump confirmed that the tariffs would take effect on August 1 instead of July 9, leading to a drop in U.S. stock index futures during Monday morning trading.
Dow Jones Industrial Average futures fell by 110 points, a decrease of 0.3%. S&P 500 index futures and Nasdaq 100 index futures fell by 0.3% and 0.3%, respectively.
WTI crude oil opened down 1%, currently at $64.95 per barrel. Spot gold opened slightly higher on Monday, reporting $3337.4 per ounce. U.S. December 10-year Treasury futures rose by 8 basis points, and federal fund futures edged up slightly.
Weekend news: OPEC+ agreed to increase production by 548,000 barrels per day in August, exceeding expectations, and is considering another increase of 548,000 barrels per day in September.
Trump and U.S. Commerce Secretary Howard Lutnick were asked to clarify the effective date of the tariffs. Lutnick responded, "The tariffs will take effect on August 1. But the president is currently setting the rates and terms of trade." Trump agreed with this.
Investors had previously expected the tariff rates to take effect this week. The 90-day delay for the 'reciprocal' tariffs that Trump initially imposed on most U.S. trading partners in April is set to end on Tuesday. Meanwhile, the deadline for the agreement between the U.S. and the EU is Wednesday, otherwise EU goods will be subject to tariffs of up to 50%.
Wall Street has just concluded a week of gains, with the S&P 500 index and the Nasdaq Composite Index closing at historical highs on Friday, partly because the market believes that the Trump administration will not implement the most severe tariffs announced in April. In recent days, the White House stated that the July trade deadline is "not critical."
Rajeev Sibal, a senior global economist at Morgan Stanley, wrote last week: "Fundamentally, trade negotiations typically take a long time to reach an agreement; U.S. free trade agreements average 3 years. Although the ongoing negotiations may be narrower in scope than a comprehensive free trade agreement, historical precedents still hold relevance."
Investors are concerned that the historically high market may become more volatile with the latest trade news from the White House, especially if the negotiation results in tariffs higher than market consensus. However, some still believe that the market rally can continue, betting that if companies can demonstrate their ability to cope with tariffs in the upcoming earnings season, they can exceed lower expectations.
"I agree with those who believe that 'we have reshaped some economic flows around tariffs,' but this is a positive story because if things work out better, it will be a profit surprise," said Tom Lee, head of research at Fundstrat Global Advisors, in an interview on Thursday. He added, "This is the most unloved V-shaped recovery."
So far, the U.S. has only reached agreements with a few countries. In May, the U.S. reached an agreement with the UK to maintain the tariff rate at 10%. Last week, the U.S. reached an agreement with Vietnam to reduce tariffs on many goods from 46% to 20%.