Trump Plays Hard Again — Why Investors Should Not Worry This Time

As Trump’s reciprocal tariff deadline approaches, the President is once again pushing for a trade deal—this time by threatening a new wave of tariffs, even targeting close allies. While this might introduce short-term uncertainty amid a historically high stock market, investors should not rush to bet on the downside. Trump's tough rhetoric often serves as a negotiation tactic, and the hidden message behind the letters suggests a high likelihood of reversal—or even a strategic pullback to support market momentum.

To start, the President sent over 10 letters on Monday to key trading partners, threatening tariffs of 25–40%. These include major allies like Japan and South Korea. However, the timing is telling: instead of taking effect on the original July 9 deadline, the new tariffs would begin on August 1—effectively buying another month for negotiations. Moreover, Trump made clear he wasn’t “100% firm” on that deadline, hinting he’s open to flexibility if counterparties come forward with proposals.

Trump’s tone remains pliable, as we may see another round of TACO. Thanks to the letters, countries like Japan and Korea are moving quickly to negotiate with the U.S. to avoid further escalation and preserve their relationships. Trump’s strategy of issuing bold threats—whether via interviews or Truth Social—has often worked in the past. He applies pressure, elicits compromise, and then closes a deal. Even China, initially resistant, entered a tit-for-tat tariff war that pushed rates over 100% in April, only to eventually de-escalate due to mutual economic reliance. Trump has consistently used this flexible approach to advance his economic agenda and bolster his second-term image.

Compared to China, Japan and Korea are likely easier negotiation partners. They don’t typically engage in proportional retaliation and share both political values and economic interests with the U.S. While China could operate independently, Japan and Korea are major exporters—especially in consumer electronics and semiconductors—and are deeply tied to U.S. demand. Vietnam serves as a recent example: despite a heavy reliance on outsourced U.S. manufacturing and weak domestic consumption, it ultimately struck a deal that lowered tariffs from 46% to just 20%. Japan and Korea, with stronger ties, should fare even better.

Crucially, even if Trump is dissatisfied with current trade progress, the new tariff proposals merely match existing reciprocal levels. For instance, the proposed 25% tariffs on Japan and Korea align with prior reciprocal rates. The same goes for Thailand and Malaysia. This implies that the worst-case scenario—around 10% baseline tariffs—is already priced in. Realistically, final tariffs may remain at 10–25%, especially since deals with Japan and Korea should be easier to reach than with China. Investors, therefore, shouldn't overreact to renewed tariff threats.

So far, Trump has reached trade agreements with China, the UK, and Vietnam, and is reportedly close with India and others. Treasury Secretary Bessent emphasized that 18 major trading partners account for 95% of the U.S. trade deficit and are the administration’s main focus. These countries shape the global economy and market sentiment. Therefore, any tariffs targeting smaller economies outside this group are unlikely to impact markets meaningfully. In this first wave of letters, only tariffs affecting Japan, Korea, Thailand, and Malaysia carry real weight—others are mostly noise.

Investors should also watch closely for countries that haven’t yet received letters. This could indicate that a deal is already in place or under negotiation. Among the remaining top 18 partners without confirmed deals (excluding those that received letters) are Canada, Mexico, Germany (EU), Taiwan, the Netherlands, Ireland, Switzerland, Italy (EU), France (EU), Brazil, and Singapore. Ongoing talks with the EU suggest both sides are working in good faith to reach an agreement soon.

Taiwan deserves particular focus, given its critical role in manufacturing and exporting advanced AI chips to the U.S. Thanks to close ties, a deal might already be near announcement. Canada and Mexico, which faced tariffs earlier this year, are also likely to reach terms soon—especially Mexico, which has kept a low profile and depends heavily on U.S. exports.

All told, most of the U.S.’s major trading partners either already have agreements or are nearing one. Given their strong reliance on exports to the U.S., countries like Japan and Korea—who just received letters—are also likely to strike deals, especially now that Trump is using pressure to speed things up. In the coming days, potential deals with the EU, India, or Taiwan could act as strong market catalysts. Even in a worst-case scenario, Trump’s reciprocal tariff plans are already largely priced in. He may even reverse some actions later, but they’re unlikely to shake the market the way they did during the first tariff wave—especially with China and the EU currently cooperating with the U.S.