U.S. Stocks Dip as Trump Announces New Tariffs

On Tuesday, the U.S. stock market experienced a slight decline, with traders digesting a series of trade-related news, including statements from President Trump that he would not extend the deadline for countries to begin paying reciprocal tariffs starting August 1, and his announcement of potential new tariffs on copper and imported pharmaceuticals.

Following a strong rally from its April lows, the S&P 500 index remained relatively unchanged on Tuesday, as traders remained cautious about trade-related risks. Copper producer Freeport-McMoran Inc. saw an increase, while a pharmaceutical index experienced significant volatility. Among the large-cap stocks, Tesla rose, while Amazon fell as Prime Day promotional sales in the initial hours showed a year-over-year decline. Chip stocks were in focus after Samsung Electronics reported its first profit decline since 2023. Wall Street is digesting the latest tariff developments, following Trump's executive order delaying the implementation date of reciprocal tariffs.

“The trade war headlines are back in the spotlight, but this doesn't mean we will repeat the mistakes of late March and early April,” said Bret Kenwell of eToro. “If there is confidence that negotiations will continue, or that the deadline will be extended, the market may continue to ignore the impact of the news.” However, Kenwell noted that if investors believe trade tensions could escalate, we may see the market pull back again. He added, “Unless the situation really deteriorates, a 5% to 10% pullback could be seen as a buying opportunity for retail investors.”

“While tariffs may remain high compared to the beginning of the year, and overall risks are also high, we believe that by the end of the year, the effective U.S. tariff rate should be around 15%,” said Ulrike Hoffmann-Burchardi, an analyst at UBS Global Wealth Management. “This will hinder economic growth but is unlikely to cause a recession.” She also suggested gradually increasing exposure to global equities or diversifying investment portfolios to hedge against future volatility.

Meanwhile, Goldman Sachs strategists raised their outlook for the U.S. market for the second time in two months, predicting that the Federal Reserve would take earlier action to cut interest rates. Led by David Kostin, the team raised their 12-month forecast for the S&P 500 index from 6,500 points to 6,900 points, and their year-end target from 6,100 points to 6,600 points. They also noted that falling U.S. Treasury yields and strong performance by large U.S. corporations could continue to drive the market higher.

At the close, the S&P 500 index fell 0.1% to 6,225.52 points; the Dow Jones Industrial Average fell 0.4% to 44,240.76 points; the Nasdaq Composite Index was virtually unchanged at 20,418.46 points; the Nasdaq-100 Index rose 0.1% to 22,702.25 points; and the Russell 2000 Index rose 0.7% to 2,228.738 points.

Trump has sent letters to multiple trading partners, announcing that starting August 1, the U.S. will impose tariffs on imports from these countries. Many other countries and regions, including Malaysia, Kazakhstan, South Africa, and Myanmar, will face new tariffs ranging from 25% to 40%.

Global market reactions have been mixed. U.S. stocks fell about 1% on July 7, but the possibility of negotiations caused some Asian stocks to rise. The yen weakened, but the won recovered its initial losses. This news came as investors were already aware of rising U.S. debt levels and increasing long-term borrowing costs, putting slight pressure on the bond market, although expectations for a Federal Reserve rate cut remained largely unchanged.

New tariffs could increase the risk of upward pressure on inflation and drag down corporate profit margins. However, most of the impact on 2025 earnings expectations has already been priced in, and second-quarter earnings growth forecasts remain conservative. In the short term, investors will likely focus on new industry and market developments.

Trump's announcement of new tariffs on multiple countries has sparked concerns about a potential trade war escalation. However, some analysts believe that the market has already priced in much of the risk, and that the impact on U.S. stocks may be limited. “The market has become more resilient to trade-related news, and investors are focusing on other factors such as earnings growth and monetary policy,” said one analyst. “While tariffs could have a negative impact on certain sectors, the overall effect on the market is likely to be muted.”

Trump's announcement of new tariffs on multiple countries has sparked concerns about a potential trade war escalation. However, some analysts believe that the market has already priced in much of the risk, and that the impact on U.S. stocks may be limited. “The market has become more resilient to trade-related news, and investors are focusing on other factors such as earnings growth and monetary policy,” said one analyst. “While tariffs could have a negative impact on certain sectors, the overall effect on the market is likely to be muted.”

Trump's announcement of new tariffs on multiple countries has sparked concerns about a potential trade war escalation. However, some analysts believe that the market has already priced in much of the risk, and that the impact on U.S. stocks may be limited. “The market has become more resilient to trade-related news, and investors are focusing on other factors such as earnings growth and monetary policy,” said one analyst. “While tariffs could have a negative impact on certain sectors, the overall effect on the market is likely to be muted.”