Despite the uncertainty created by Donald Trump’s looming 1st August deadline for completion of tariff deals, July proved to be a relatively benign month in markets. In large part this was due to rising optimism that most key deals would be concluded before month end, avoiding worst-case outcomes, optimism which proved to be well founded. In deals that were universally viewed as heavily in favour of the US, 15% tariffs were agreed with Japan and the EU, along with commitments to invest $550bn and $600bn respectively in the US, while US concessions were notable for their absence. With the US a clear winner in the negotiations, the deals exposed a weakened Prime Minister Ishiba in Japan following the loss of the ruling coalition’s majority in the Upper House elections, and the absence of effective leadership in the EU, with French PM Bayrou describing the deal as an act of submission and a dark day for Europe. The UK’s earlier deal to accept 10% tariffs now looks favourable, although the concessions made were substantial.
