Market Volatility Risk: EU-US Tariffs and Summer Lull

EU-US Trade Negotiations

• 🇪🇺 The EU is working towards a negotiated trade settlement with the US and has suspended retaliatory tariffs scheduled for tomorrow.
• 🇺🇸 The White House has requested more concessions from Europe, leading to the EU's decision to pause counter-measures.

Tariff Escalation and Impact

• 📈 President Trump is reportedly emboldened by strong US market performance and growth, potentially leading him to push the EU harder on trade.
• 📉 Proposed tariffs have increased significantly, with a potential blended rate around 13%, a substantial rise from earlier in the year.
• ⚠️ A 30% tariff on EU goods, if implemented on August 1st, could be damaging for European exporters, especially those already impacted by a strong dollar.

Market Complacency and Volatility

• 🧐 Market calmness despite the size of proposed tariffs is surprising, suggesting a degree of complacency among investors.
• 📉 With low liquidity during the summer months, the potential for significant market volatility is considered high.

EU's Counter-Measures

• 🛡️ The EU has held off on its own counter-measures until August 1st but is developing a more substantial package.
• ⚖️ Imposing these further counter-measures is seen as challenging for the EU, but they must be kept as a potential option if negotiations fail.