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Most trade deals are apparently still in limbo, but the 90-day pause on the majority of President Trump’s “Liberation Day” tariffs is expiring soon. July 9, to be exact.
Here’s what we know about where we stand and how tariffs continue to impact markets and monetary policy.
In a Fox News interview recorded Friday and released Sunday, Trump said that while he doesn’t intend on extending the pause, he “could.”
Bloomberg and Reuters, both citing sources familiar, reported this morning that the European Union is willing to accept a trade agreement with the US (pending a few adjustments). The European Commission has agreed to a 10% tariff on several industries but asked for lower levies on a few sectors: pharmaceuticals, alcohol, semiconductors and commercial aircrafts, per Bloomberg.
A Canada-US deal is looking more promising after the former said it would abandon a proposed digital services tax (Trump last week called that a “direct and blatant attack” on the US). White House economic adviser Kevin Hassett told Fox yesterday that trade talks would resume “immediately.” Reuters reported that the US and Canada plan to have a deal penned by July 21.
China and the US entered a separate agreement in June to pause certain levies until Aug. 9, so next week’s deadline does not apply to Chinese imports.
While much of Washington is busy at the negotiating table, Fed Chair Jerome Powell spent Tuesday morning speaking at the European Central Bank forum in Portugal. The ECB’s Christine Lagarde said she’s very satisfied that the region’s inflation has reached its 2% target.
“I’m not saying mission accomplished, but I am saying target reached,” she said — adding that though there’s increased uncertainty ahead, the central bank is well equipped for the “tormented waters.”
If Powell, who spoke on a panel with Lagarde, is jealous of the EU hitting 2% inflation, he didn’t show it.
The US economy is “healthy overall,” Powell said. “If you ignore the tariffs for a second, inflation is behaving pretty much exactly as we had expected and hoped that it would.”
Speaking of tariffs, the moderator got a chance to ask what we’ve all been wondering: What would the Fed have done if there hadn’t been a “Liberation Day?”
Powell’s response was a bit guarded (did you expect anything different?), but was still fairly interesting. His full response (lightly edited for clarity) is below:
Moderator: Would the Fed have cut more by now if it weren’t for the tariffs?
Powell: I think that’s right. In effect, we went on hold when we saw the size of the tariffs. Essentially all inflation forecasts for the United States went up materially as a consequence of the tariffs. So we didn’t overreact. In fact, we didn’t react at all. We’re simply taking some time.
Trump has continued to ask Powell to cut rates and now, in the final months of his term, Powell is biting back.
Keep an eye on your inbox for tariff deals and inflation rate updates in the coming days.
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