Markets Waver As Trump Readies Tariff Warning Letters

Key points

Governments rush to secure US trade deals by 9 July
Only UK, Vietnam have finalised trade pacts
Trump to send 10 tariff notices daily to countries

HONG KONG, China: Most equities fell Friday as Donald Trump’s deadline to avert his steep tariffs approached, with the US president saying he planned to start sending letters informing trading partners of their rates.

Uncertainty leading up to next week’s cut-off tempered the positive lead from another record on Wall Street, where a forecast-busting US jobs report soothed worries about the world’s top economy.

Governments around the world have fought to hammer out deals with Washington ahead of the July 9 deadline, set after Trump unveiled a blitz of levies in early April.

He and his top officials have said several were in the pipeline, but only Britain and Vietnam have signed pacts while China has agreed to a framework for it and the United States to slash tit-for-tat tolls and ship certain products.

Issuing notices

While negotiators continue to seek ways to avert the worst of the White House’s measures, Trump warned Thursday he would soon be issuing notices to capitals.

“My inclination is to send a letter out and say what tariff they’re going to be paying,” he told reporters. “It’s just much easier.”

He added: “We’re going to be sending some letters out, starting probably tomorrow, maybe 10 a day to various countries saying what they’re going to pay to do business with the US.”

The prospect that trading partners from Japan and South Korea to India and Taiwan could be hit with stiff tariffs fuelled fresh worries about the global economy.

Losing streak

Hong Kong extended a recent losing streak, with Seoul, Singapore, Taipei, Mumbai, Bangkok, Jakarta and Manila also falling.

London, Paris and Frankfurt fell at the open.

Still, Tokyo edged up with Shanghai, Sydney and Wellington.

Traders were unable to pick up the baton from their New York colleagues, who sent the S&P 500 and Nasdaq to more record closes ahead of the Independence Day break.

Those gains followed data showing the US economy topped expectations to add 147,000 jobs in June while unemployment dipped to 4.1 per cent from 4.2 per cent, which was also better than estimated.

The reading was taken as a sign the labour market remained in rude health despite warnings about the impact of Trump’s tariffs.

Denting hopes

It also dented hopes that the Federal Reserve will cut interest rates at its next meeting this month, with bets now on two reductions before the end of the year — the first likely in September.

However, analysts suggested that all was not what it seemed, pointing to softness in the private sector.

“We think that private-sector hiring has stalled, and we may see sporadic layoffs in some industries in the coming months,” warned analysts at MUFG.

“Despite the unemployment rate having fallen… the flow of potential workers that remained out of the labour force rose sharply in June (and over 750k have dropped out of the labor force over the past two months), further highlighting the weak hiring environment.

“We continue to view labour demand as being fundamentally weak relative to the past several years.”

Investors in quandary

The passage of Trump’s “Big, Beautiful Bill” also left investors in a quandary as they weighed the extension of huge tax cuts and less spending with forecasts that it will add around $3 trillion to the already ballooning national debt.

Still, it included a $5 trillion increase in the debt limit, removing the risk the country could default on its bond payments.