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Investing.com - A subdued market reaction to a raft of trade-related developments this week suggests that investors have "turned the page on the tariff story," according to analysts at Piper Sandler.
Trump has sent a slew of letters to different countries, including major suppliers Japan and South Korea, detailing the higher tariff rates they face should they not reach a trade deal with the United States.
He also extended the deadline for the heightened levies to take effect to August 1. They were previously slated to kick in today.
Still, Trump insisted at a cabinet meeting on Tuesday that the new deadline will not be pushed back any further, after stating earlier this week that it was “not 100% firm.” He added that negotiations are going well with the European Union and China, but flagged that the EU may be days away from receiving its own tariff letter.
Unlike prior tariff announcements this year that have roiled stock and bond markets, investors had a widely muted response to the most recent salvo in Trump’s aggressive tariff agenda. The main averages on Wall Street ended trading on Tuesday in mixed fashion, while option-implied volatilities hover around their lowest levels since April.
"The investor consensus is the worst of the trade fight is behind us, the tariffs in place are digestible, and tariffs are likely headed lower because of deals," the Piper Sandler analysts said. Other observers have suggested that Trump may be less willing to roll out trade policies that will upset markets.
However, in a note to clients, the analysts argued that investors should still assume that Trump will continue to pursue elevated levies, even after he has already instituted a baseline 10% tariff and heightened duties on items like steel, aluminum, and autos. They added that there is "scant evidence" that tariffs are going to be rolled back, while the prior hikes are "too substantial to be digested without a least some indigestion."
"Investors may be done with tariffs, but we doubt Trump’s tariff agenda is done with investors," the analysts wrote.