Tariff Letters Spoil the Party
American stocks slipped back from their all-time highs after President Trump sent out letters to more world leaders to warn that new tariffs will take effect from the start of August. Canadian Prime Minister Mark Carney was informed on Thursday that the US will charge a 35% tariff on goods imported from its northern neighbour and over the weekend he wrote to the presidents of the EU and Mexico, two of America’s closest trading partners, to tell them a 30% tariff would be imposed on their exports to the US.
The announcements suggest that countries just have a two-week window to negotiate and conclude trade deals. The EU has threatened to retaliate with like-for-like tariffs on €21 billion of US exports, including chicken, motorcycles and clothing.
The White House administration has only reached three deals, with the UK, China and Vietnam, since the ‘Liberation Day’ reciprocal tariffs in early April.
Prior to the dispatch of the letters, investors were in an ebullient mood and semiconductor manufacturer Nvidia, riding the wave of the artificial intelligence boom, became the world’s first public company to reach a $4 trillion market valuation.
Just two years ago, the company was valued at $1 trillion and to give it some perspective, if Nvidia was a country, it would only rank behind the economies of the US, China, Germany, India and Japan.
Nvidia is the unquestioned leader in AI, with a dominant 75% market share in AI accelerators, the specialised processors used to train advanced machine learning models. Nvidia chief executive Jensen Huang has asserted that AI and robotics will generate trillions of dollars in sales and demand is “kicking into turbocharge”.
Delta Air Lines also had a good week. Shares in the world’s most valuable airline, and second largest by passenger numbers, jumped more than 12% on Thursday after it reinstated its 2025 profit outlook and provided upbeat guidance for the summer months.
Delta posted strong growth from the sales of higher priced seats in first and business classes and its partnership with American Express increased 10% in the second quarter from the same period last year to $2 billion. CEO Ed Bastian said that the tax cuts included in the One Big Beautiful Bill Act should give also customers more confidence.
In commodities markets, Brent crude briefly climbed back above $70 a barrel after President said he would instruct the US military to send more Patriot air defence missiles to Ukraine and threatened Russia with 100% secondary tariffs if Vladimir Putin doesn’t end the war soon. Secondary tariffs would impose levies on countries that buy Russian oil such as China, India, Brazil and Turkey.
However, oil was outshined by precious metals, including silver (+5.3%) which rose to its higher level since September 2011. Silver has attracted demand from investors seeking alternatives to a near-record high gold price and physical supply is under strain in London, where it is held by most exchange trade funds (ETFs). Since February, the volume of silver-backed ETFs has rise by 2,570 tonnes.
Cryptocurrencies also caught investors’ attention and Bitcoin broke through $120,000 for the first time ahead of “crypto week” in which US lawmakers will debate a number of bills aimed at establishing a clear regulatory framework for digital assets.
In the week ahead, the focus will be on the start of the second quarter corporate earnings season, headlined by the Wall Street investment banks Goldman Sachs, Morgan Stanley and Bank of America.
In the economic calendar, the ONS will release the latest UK employment data, including the growth in wages and unemployment rate. Any signs of weakness will put more pressure on the Bank of England to lower interest rates in August.
(Cover Image Source: Eric Ward)