Trump Revives Trade War Playbook with Tariff Threats

📰 Executive Summary

U.S. President Donald Trump confirmed his administration will issue tariff ultimatum letters to 12 countries starting July 8, signalling a unilateral escalation in global trade tensions. These letters, containing non-negotiable tariff rates of up to 70%, are expected to take effect on August 1.

Moreover, on 7 July 2025, markets reacted sharply after U.S. President Donald Trump announced the imposition of 25% tariffs on imports from Japan and South Korea, effective 1 August. This moves sparked fears of renewed global trade tensions, particularly in the semiconductor, automobile, and electronics sectors, where both nations hold strategic importance. 

🌍 Key Highlights from the Announcement

• Tariff Ultimatums to 12 Countries: While the countries have not been officially named, Asian Countries and EU nations are likely targets amid stalled bilateral talks.
• Tariff Rates: Baseline import tariff of 10%, escalating up to 70% for "unfair trade practices."
• Global Allies Disengaged: The EU and Asian Countries have also seen negotiations stall, prompting worries of a coordinated backlash.
• Existing Deals: Only UK and Vietnam have secured partial exemptions with conditional deals.

📊 Potential Global Market Impact

1. Equity Markets

• Short-Term Volatility: Expect a sharp risk-off sentiment in global equities. Emerging markets, particularly India and ASEAN, could see sharp outflows due to export-dependence.
• Sector Hit: Companies in automobiles, electronics, medical devices, agriculture, and digital services may experience earnings downgrades due to margin compression and demand shifts.
• Winners: U.S.-centric firms with minimal foreign revenue exposure could temporarily outperform.

2. Commodities

• Oil and Industrial Metals: Demand outlook dims amid uncertainty; copper and aluminium may face downward pressure.
• Gold: Likely to rise as a safe haven.

3. Currencies

• USD Strengthening is likely amid risk aversion.
• EM Currencies (INR, VND, THB) may face depreciation pressures due to capital flight and weaker trade outlooks.

🛡️ Strategic Recommendations for Investors

🔍 Short-Term (Next 1–4 Weeks)

• Reduce exposure to EM equities, especially in trade-exposed sectors.
• Increase allocation to U.S. Treasuries, gold ETFs, and cash equivalents.
• Hedge FX risk in export-heavy portfolios, especially for INR and ASEAN currencies.

📈 Medium-Term (1–6 Months)

• Monitor policy clarity: Volatility may provide buying opportunities in high-quality Indian and Southeast Asian stocks if trade retaliation is avoided or delayed.
• Rotate into defensives: Consider healthcare, consumer staples, and utilities, which are less exposed to global trade.
• Watch corporate guidance in the Q2 earnings season for margin and demand impacts.

⚠️ Risks to Monitor

• Retaliatory tariffs from India, the EU, or others could ignite a full-scale trade war.
• Supply chain disruptions, especially in pharmaceuticals, electronics, and auto components.
• Increased populist policy noise in an election year could magnify market uncertainty.

Conclusion:

President Trump’s tariff ultimatum marks a significant turning point in global trade dynamics, reinforcing a shift from multilateralism to aggressive bilateral enforcement. With tariffs potentially rising to 70%, the threat to global supply chains, investor sentiment, and trade-dependent economies is substantial. Markets are likely to remain volatile in the near term as stakeholders await clarity on the list of affected nations and potential retaliatory measures. For investors, caution and selectivity are paramount. A strategic focus on resilient sectors, geographic diversification, and defensive allocations will be essential to navigate this evolving environment. While long-term opportunities may emerge, protecting capital amid heightened geopolitical risk should be the immediate priority until greater policy certainty is restored.

Customer Notice:

Nextgen Global Services Pty Ltd trading as Kapitales Research (ABN 89 652 632 561) is a Corporate Authorised Representative (CAR No. 1293674) of Enva Australia Pty Ltd (AFSL 424494). The information contained in this website is general information only. Any advice is general advice only. No consideration has been given or will be given to the individual investment objectives, financial situation or needs of any particular person. The decision to invest or trade and the method selected is a personal decision and involves an inherent level of risk, and you must undertake your own investigations and obtain your own advice regarding the suitability of this product for your circumstances. Please be aware that all trading activity is subject to both profit & loss and may not be suitable for you. The past performance of this product is not and should not be taken as an indication of future performance.

Disclosure: The information mentioned above has been sourced from the company reports and a third-party database, i.e. Koyfin. Investors are advised to use strict stop-loss to protect their investments in case of any unfavorable/uncertain market events.

Kapitales Research, Level 13, Suite 1A, 465 Victoria Ave, Chatswood, NSW 2067, Australia | 1800 005 780 | info@kapitales.com.au