#TrumpTariffs Markets: Conditional Stability vs. Gathering Storms

1. Equities: Short-term rallies (S&P 500 +10% since April) reflect investor optimism about tariff compromises and strong U.S. demand . However, Q2 earnings (from July 15) may reveal margin pressures as companies absorb tariff costs, with EPS growth projected to slow to 4% from 12% in Q1 .

2. Global Volatility: The July 9 deadline for trade deals could trigger turbulence if tariffs exceed 10-20%. Conflicting signals (e.g., threats of 70% rates) and limited deals (only UK/Vietnam/China so far) amplify uncertainty . The dollar’s 11% drop in H1 2025—its worst since 1973—signals eroded confidence .

3. Growth Risks: Sustained tariffs could reduce U.S. GDP by 0.5-0.9% and global GDP by up to 1%, with inflationary pressures lingering as inventories deplete .

₿ Crypto & Risk Assets: Divergent Pressures

- Bitcoin initially acted as a tariff hedge (rising 26% YTD with gold) but now correlates more closely with risk assets like tech stocks. Recent selloffs align with equity downturns, reflecting its dual role as a liquidity-sensitive asset .

- Broader risk assets (e.g., tech stocks) remain vulnerable if tariffs accelerate Fed rate cuts, though current pricing suggests only two 2025 cuts .

💎 Conclusion

Markets may hold gains if tariff rates stabilize near 10%, but escalation beyond August 1 risks volatility from:

- Supply chain disruptions (auto prices already +8.4% )

- Retaliatory measures (e.g., EU/India responses )

- Corporate earnings downgrades

Crypto could decouple as an inflation hedge if dollar weakness persists, but remains tied to risk sentiment in the short term.