European stock markets saw slight gains, while Wall Street remained largely flat on Tuesday, following President Donald Trump’s decision to extend a tariff deadline.
Despite the reprieve, the ongoing uncertainty surrounding US trade policy kept significant market gains in check.
Just hours before his “Liberation Day” tariffs were set to expire, Trump announced a three-week extension, allowing targeted nations more time to negotiate trade agreements.
This move provided “some relief to financial markets,” according to AJ Bell analyst Dan Coatsworth, though he noted it merely “extends the uncertainty.”
Trump’s Tariff Threats and Market Reactions
Trump has dispatched letters to over a dozen countries, including key trading partners like Japan and South Korea, outlining potential tariffs of 25% to 40% if deals aren’t reached by the new August 1 deadline.
These duties could impact nations such as Indonesia, Bangladesh, Thailand, South Africa, and Malaysia. When questioned about the firmness of the new deadline, Trump stated it was “firm, but not 100 per cent firm.”
Investors cautiously welcomed the delay, hoping for successful negotiations, with some interpreting Trump’s action as a negotiation tactic.
While Asian markets generally closed higher, including a 0.3% rise in Tokyo, indicating that some investors view the news as a “headline risk rather than a market-altering shock,” according to Trade Nation’s David Morrison, the implications are still significant.
Wendy Cutler of the Asia Society Policy Institute warned that tariffs on close partners like Japan and South Korea “will send a chilling message to others,” especially given their “significant manufacturing investments in the US.”
As of mid-afternoon GMT, the Dow, S&P 500, and Nasdaq remained flat. London, Paris, and Frankfurt all closed with modest gains of around 0.5%. The dollar showed mixed performance against major currencies, while oil prices rebounded slightly, with Brent crude nearing the $70 mark.
