Nick Goold
Why Are Markets So Calm Despite Rising U.S. Tariffs?
President Trump recently extended the 90-day tariff freeze, moving the deadline for new tariffs to August 1. Alongside the extension, he confirmed increases in tariffs on major U.S. trading partners—including Europe, Canada, Japan, and others.
Despite these aggressive trade actions, market participants have remained surprisingly calm. This is a sharp contrast to April 2025, when the initial round of tariff announcements triggered a significant market selloff. So why are markets holding steady now? And what could cause that to change as the new August 1 deadline approaches?
What Is Trump’s Latest Tariff Deadline?
President Trump has officially extended the tariff freeze to August 1, after a previous deadline of July 9. However, he emphasized this is the final extension, stating:
“All money will be due and payable starting August 1—no extensions will be granted.”
The new U.S. tariff package includes:
- 30% tariffs on all goods from the EU and Mexico
- 35% tariffs on imports from Canada
- Additional tariffs on Japan, South Korea, and 20+ other nations
While negotiations continue, the message from the administration is clear: concessions must be made before August 1 or tariffs will be enforced.
Why Markets Haven’t Reacted Like in April
1. Markets Expect a Last-Minute Deal
Many market participants believe Trump’s tariffs are part of a negotiation strategy, not a permanent change in trade policy. It’s widely assumed that the administration won’t risk hurting the U.S. economy or financial markets.
2. Investor Psychology Has Shifted
In April, markets reacted sharply to initial tariff threats. But now, market participants seem to have adopted a wait-and-see approach, anticipating that the aggressive rhetoric will result in renegotiated deals, not full-scale trade wars.
3. Economic Opinions Are Changing
While economists initially warned of severe fallout, some now argue that targeted tariffs could offer short-term advantages—such as strengthening domestic industries and providing leverage in international talks.
How Tariffs Impact Federal Reserve Policy
Tariffs could push prices higher, making it harder for the Federal Reserve to cut interest rates. This has made the market outlook more uncertain. There’s also talk that Fed leadership could change, depending on how the central bank handles the situation.
Markets Don’t Move on Headlines Alone
Markets don’t move automatically based on news. Price movements reflect the diverse opinions of millions of market participants, including hedge funds, retail traders, and institutional investors.
- Some view tariffs as short-term pressure tactics
- Others worry about long-term global disruption
That balance—between optimism and caution—is why the market remains calm but fragile.
What Could Cause Sudden Market Volatility?
While markets remain stable for now, the risk of a sharp reversal has not disappeared. The tariff situation continues to weigh heavily on market sentiment, and volatility could return at any moment.
Several key triggers could spark a sudden shift:
Breakdown in trade negotiations: If talks between the U.S. and key partners like the EU, Canada, or Japan stall or collapse, markets could react quickly and negatively.
Escalation in rhetoric: A single headline from President Trump—announcing a surprise tariff increase or taking an especially aggressive tone—could easily rattle investor confidence.
Retaliatory measures from other countries: If major trading partners announce counter-tariffs or legal challenges at the WTO, markets may interpret that as a sign that the trade conflict is intensifying.
Surprise U.S. economic data: Unexpected inflation readings, poor job numbers, or weak retail sales could raise concerns about the underlying strength of the U.S. economy—especially in a high-tariff environment.
Institutional selling: If large funds decide to reduce exposure and hedge against growing uncertainty, their moves could trigger broader market corrections.
Typical Market Reactions:
- Equities tend to drop quickly as risk sentiment turns negative and investors rush to reduce exposure.
- The U.S. dollar may strengthen due to increased inflation expectations and shifting interest rate outlooks.
- Gold prices often rally, driven by demand for inflation protection and geopolitical hedging.
In a market environment as fragile and headline-driven as this, one piece of unexpected news could be all it takes to shift momentum and trigger a wave of volatility.
Summer Market Dynamics: Quiet Can Be Deceptive
Lower Volume = Bigger Moves
With many large players on vacation, summer trading conditions mean thinner liquidity. This can:
- Reduce daily volatility
- Magnify reactions when big news breaks
That’s why even a small shift in sentiment can cause large market swings during July and August.
Trading Strategy Before the August 1 Deadline
With the August 1 tariff deadline approaching, market participants should stay flexible and focused. This isn’t the time to predict the news—it’s the time to watch what the market does and react with discipline. Here are some practical strategies:
1. Expect Larger Moves on Breakouts
In a market driven by headlines, breaking major support or resistance can lead to bigger moves than usual. For example:
- If equities break key support, the market could fall more than expected, resulting in a bigger move. Consider setting a larger profit target than usual and use a trailing stop to extend your profits.
- If the USD breaks above resistance, the move could be large. The dollar has been weak in 2025, so any strong breakout could trigger a big reversal.
- Gold has been range-bound lately, but if trade talks break down or negotiations end well, it could move strongly in one direction. Be ready for a breakout.
2. Intra-Day Range Trading Can Be Profitable
During the summer, markets often trade in sideways ranges. This can create good short-term trading opportunities between support and resistance levels. If you’re trading these ranges, use tight stops, be quick to take profits, and don’t chase after false breakouts.
3. Follow Price, Not Just Headlines
News matters, but markets don’t always react the way you expect. Instead of trying to predict the outcome, focus on what price is actually doing. If bad news is released but the market holds steady, that may signal underlying strength. On the other hand, if prices fall sharply on minor headlines, it could indicate growing fear. Let price action—not just headlines—guide your decisions.
4. Check the Calendar for Key Events
Always look at the economic calendar for big data like U.S. inflation, jobs, or GDP. Also watch for speeches or comments from Trump and other world leaders. Just one unexpected comment or number can move the market quickly. Planning ahead helps you avoid getting caught off guard.
5. Have a Plan and Stay Confident
Uncertainty can make you want to trade more, but overtrading leads to losses. The best trades come from clear setups and a solid plan. If the market doesn’t look good, it’s okay to sit out and wait. Staying confident and patient is just as important as taking action.
Calm Now, But Don’t Get Comfortable
Markets are betting that a deal will be made, and that Trump’s hardline stance is part of a larger negotiation strategy. But the situation can change quickly—and with fewer participants in the market during summer, any move could be amplified.
Key Takeaways for Traders:
- Stay alert for news, but trade based on price behavior
- Be aware of thin summer liquidity
- Prepare for potential volatility near the August 1 deadline
