April seems like it happened a lifetime ago. On April 2, dubbed by President Donald Trump as “Liberation Day,” the White House imposed sweeping tariff rates on the United States’ largest trading partners.
The high rates caught many investors off guard, and the stock market plummeted. By April 9, Trump announced a 90-day pause on the high tariff rates to give countries time to negotiate trade deals, leading to a major market rally. That 90-day pause will end on July 9. Should investors buy stocks before then?
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What has happened since the pause?
Since the pause, the Trump administration has made some progress on forging trade deals, but ultimately, there is still much to be decided.
Image source: Getty Images.
Currently, there are 50% tariffs in place on steel and aluminum imports, although the rate falls to 25% for any of these materials coming from the United Kingdom. There are also 25% tariffs in place on certain car parts. Furthermore, the 10% base level of tariffs on imports from most other countries remains.
The U.S. has already struck a trade agreement with the U.K., leaving the 10% tariff rate intact. The White House also appears to have struck a trade deal with China, which has been the biggest question mark in all of this. The deal appears to set a total tariff rate of 55% on Chinese goods, although that includes the 25% tariffs Trump imposed on Chinese goods in his first term, meaning the new 30% rate is expected to be left in place.
As of June 25, there have been many reports of the U.S. closing in on agreements with countries like Vietnam and India, while trade deals have not been reached with major trade partners like the European Union, Japan, and Canada, as of this writing.
What will the situation look like on July 9?
I’m expecting more trade deals will be struck by July 9. It’s also possible there is another pause, which Treasury Secretary Scott Bessent recently hinted at for countries that show “good faith.”
However, I also wouldn’t rule out Trump letting some higher tariff rates go into effect for imports from countries that the administration does not believe negotiated in good faith. The stock and bond markets are always good barometers for how much room Trump has to maneuver when it comes to tariffs.
Despite everything that has happened since April, the stock market is nearing all-time highs as of this writing, and the yield on the 10-year Treasury note is at 4.33%, giving Trump the flexibility to still take a tougher stance.
What is the best outcome? Can you buy stocks?
Realistically, the best outcome for July 9 is clarity. If the U.S. sets final tariff rates at the 10% level or in that vicinity for most of its trading partners, the market will likely respond positively. The resulting clarity allows companies to figure out their capital expenditure plans and provide more accurate earnings and revenue guidance.
Clarity will also provide the Federal Reserve with better insight regarding tariffs’ potential impact on inflation. Currently, tariffs appear to be the single largest roadblock preventing the Federal Reserve from lowering interest rates, which Trump badly wants to happen. Another extended tariff pause is also possible and would likely be received positively because it shows the Trump administration is willing to take the time to negotiate.
So, should you buy stocks before July 9? Yes, but you shouldn’t try to trade the event because, as investors have seen many times over the last decade, President Trump is quite unpredictable.
Short-term trades also have a higher chance of losing money, especially with the market hovering around all-time highs. Investors should be buying benchmarks like the S&P 500 or stocks they plan to hold for the long term. Seeking out individual names with more reasonable valuations is also a smart move, as opposed to buying popular names at sky-high valuations.
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Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
