Trump's Tariff Threats Fail to Rattle Markets as S&P 500 Hits Record High

President Trump's latest tariff threats, which include imposing levies ranging from 10% to 70% on countries that did not sign trade deals with the U.S. since April and an additional 10% tariff on countries aligned with the BRICs group, have not rattled markets as they once would have. The S&P 500 index has reached a new record high, and volatility remains muted, with the VIX "fear" index showing little activity. This lack of market reaction can be attributed to investors becoming accustomed to the policy chaos and uncertainty that has characterized Trump's presidency, treating it as the new normal.

Analysts have noted that the impact of tariffs on the global economy may be smaller than initially feared. Goldman Sachs argues that while the tariffs are significant for the U.S. economy, the exposure of trading partner economies is relatively small. This suggests that the tariffs may not derail global growth. Furthermore, UBS analyst Paul Donovan has pointed out that the negative impact of the tariffs may be delayed, with consumers not experiencing the inflation spike until January next year, assuming Trump does not retreat from his tariff threats.

The market's resilience in the face of Trump's tariff chaos is also a reflection of the broader economic environment. Despite the ongoing trade tensions, investment, manufacturing employment, spending, and overall activity have held up globally in the first half of 2025. This suggests that the global economy is more resilient than initially thought, and that investors are confident in the economy's ability to weather the ongoing trade tensions.

In conclusion, the market's lack of reaction to Trump's latest tariff threats is a reflection of the new normal of uncertainty that has characterized his presidency. Investors have become inured to policy chaos and are treating it as background noise. Furthermore, the impact of tariffs on the global economy may be smaller than initially feared, and the broader economic environment remains robust. As such, investors are confident in the economy's ability to weather the ongoing trade tensions, and the market's resilience is likely to continue in the face of further policy uncertainty.