Classic 'TACO'? Investors shrug off Trump's latest tariff announcement

• The tariffs, authorized under Section 122 of the 1974 Trade Act for up to 150 days, took effect at 10% on Tuesday with expectations to increase to 15% shortly, though investors see this as temporary policy.
• Wellington Management predicts U.S. tariff rates will drift down to around 9% by year-end, maintaining their view that Trump's trade threats typically ease over time.
• Market participants cited 'bigger issues' like AI and Iran tensions as more significant concerns than tariffs, with wealth managers saying there is 'no clarity on which one can make an informed decision' given constant policy shifts.

Market Summary: Investors Unfazed by Trump's New Global Tariffs

Key Developments

President Donald Trump implemented a blanket 10% tariff on global imports Tuesday, with plans to increase it to 15% shortly. The move follows the Supreme Court's decision to strike down his previous country-specific tariffs announced in April. The tariffs are imposed under Section 122 of the 1974 Trade Act, which allows up to 15% duties for 150 days.

Market Reaction

Global markets showed muted responses, contrasting sharply with April's sharp selloff:

• European Stoxx 600 rose slightly after initial losses
• Asia-Pacific stocks lacked direction
• U.S. markets opened slightly higher

Investment Perspective

Analysts characterized the subdued reaction as the "TACO" trade—"Trump Always Chickens Out"—reflecting investor familiarity with the president's pattern of threatening tariffs before moderating them.

Key analyst views:

• Wellington Management's Paul Skinner expects general tariff rates to decline to around 9% by year-end
• BRI Wealth Management's Toni Meadows described the tariffs as "a tax on the U.S. consumer" that increases inflation and reduces growth
• Kingswood Group is maintaining a holding pattern, citing lack of clarity

Market Implications

Investors are prioritizing other concerns, particularly AI developments and Iran tensions, over tariff announcements. The temporary nature of the legislation (150-day limit) reduces long-term investment impact. Regional effects vary, with the U.K. potentially losing and China potentially benefiting, though analysts consider these shifts non-investable.

ING's Carsten Brzeski noted the focus has shifted from absolute tariff levels to uncertainty about future policy direction and potential EU renegotiations of bilateral deals.