President Donald Trump’s “GREAT DAY” for America is finally here — but markets aren’t cheering the latest news on the trade war.
Following weeks of encouraging updates on trade deals with major partners, US stocks dropped Friday after the president signaled he would stick to his August 1 deadline for tariff negotiations and signed an executive order that included an updated slate of taxes on imports.
The sell-off gained steam as investors took in a weaker-than-expected US jobs report. The economy added 73,000 jobs in July, according to the Bureau of Labor Statistics, lower than the 100,000 payrolls economists expected.
Treasury yields tumbled after the report, with the 10-year bond yield falling 10 basis points to 4.25%. The jobs data recalibrated expectations for rate cuts in September for the second time this week.
After the odds of a cut at the next meeting dwindled following Jerome Powell’s cautious tone on the economy midweek, markets again revised the outlook.
According to the CME FedWatch Tool, traders now see a 67% chance of a 25-basis-point cut in September, up from less than 50% on Wednesday.
Here’s where US indexes stood around 10:30 a.m ET. on Friday:
A “GREAT DAY” for America
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Trump’s update to tariffs, which were announced in an executive order Trump signed Thursday evening, imposed import duties ranging from 10%-41%.
The order added that goods that are transhipped in a bid to avoid tariffs — swapping hands between other nations before coming to the US — will also be subject to a 40% tariff.
Some nations saw their updated tariff rates lowered from what Trump initially proposed, despite not yet coming to a trade agreement with the US. Taiwan, India, and Malaysia were among those that saw a slight tariff reduction. Some countries, like Brazil and Switzerland, saw their tariff rate increase.
Speaking to NBC News late Thursday, Trump said it was “too late” for nations to avoid the tariffs, but suggested that the door remained open to trade deals down the road. The updates are set to swing into effect on August 7, instead of the August 1 deadline Trump initially proposed and promoted as a “GREAT DAY FOR AMERICA” in a post on Truth Social earlier this week
“It doesn’t mean that somebody doesn’t come along in four weeks and say we can make some kind of a deal,” he told NBC in a phone interview.
Even then, investors are pricing in the impact of tariffs more acutely, despite brushing off Trump’s tariff threats in recent weeks. Some traders have been betting on the idea that Trump will eventually strike a softer tone on his trade policy, continuing what’s come to be known as the TACO Trade (Trump Always Chickens Out).
Uncertainty over the tariff situation is still looming. Trade talks are still ongoing, and China, which was left off the updated list of tariffs, has a separate deadline of August 12 to reach a trade agreement with the US.
“This is unlikely to be the final word, as it still seems likely that some other countries will reach their own deals with the US, while there is a chance that the US courts will eventually strike down these tariffs,” Stephen Brown, the deputy chief North America economist at Capital Economics wrote in a note.
“Tariff worries are back in focus,” Glen Smith, chief investment officer at GSD Wealth Management, wrote Friday. “We remind investors that short-term swings can create good entry points for long-term investors.”
Job market buckles
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Tariff woes were compounded by a weak nonfarm payrolls report.
Employers added 73,000 jobs in July, below estimates of 100,000. But even more troubling were the revisions for May and June, which saw their figures revised lower by a combined 258,000. The unemployment rate edged up to 4.2%.
“Today’s Jobs report is unambiguously soft and a reflection of the trade and tariff impact on economic growth,” Art Hogan, the chief market strategist at B. Riley Wealth, wrote in a note. “Both the actual report and the big negative revisions are more evidence that the trade policy will slow growth,” he added.
The downward revisions reveal “cracks” in the labor market, Jeffrey Roach, chief economist at LPL Financial, said. It’s also causing more investors to expect a rate cut in September, he said, despite Fed Chair Powell striking a hawkish tone earlier in the week, Roach said.
“The stock market will probably move past this particular report and keep climbing this month, but today could be an ugly day in the market given the confluence of new tariff announcements and more evidence that the job market is slowing,” Chris Zaccarelli, the chief investment officer at Northlight Asset Management, said in a note.