Bassanese Bites: Art of the deal – July 28 2025

Global equities pushed higher last week, helped by solid US earnings reports and the completion of more major US trade deals. 

Trump causes Japan and Europe to blink 

Say what you like about US President Donald Trump but he does appear to have secured some fairly good trade deals with both Japan and the European Union – at least from his perspective. Both major US trading partners have agreed to a 15% tariff on most of their goods imported into the US, along with a commitment to invest billions into the US economy – and without trade retaliation!

While this still amounts to a tax on US corporations and/or households, markets will likely construe these deals as a win for Trump – major economies are rolling over just to get a deal done so we can all move on with our lives. As I noted last week, to the extent that most trading partners will face similarly stiff tariffs, they should not lose much competitiveness (at least against each other) with regard to selling into the US market. 

Reports suggest an updated deal with China is also in the wings. 

Is this good news?

From a markets perspective, all this is great news – there are good grounds to think that tariff uncertainty will soon be behind us and the overall level of tariffs won’t be enough to tip the US economy into recession. 

That said, we do likely face a few months of higher-than-usual US monthly inflation gains (as some of the tariffs are passed through to prices) but markets seem well prepared for this. Provided this remains a one-off hit to the price level – and is not entrenched into higher inflation through a wage-price spiral – it’s an acceptable outcome for markets. 

There will also likely be some hit to US profits and household real incomes, which could temporarily slow economic growth. But the tariff hit is coming at a time of still-resilient US economic growth and easing underlying inflation pressures. Offsetting the tariff hit (to an extent) will be reduced trade uncertainty and the Fed waiting in the wings to cut interest rates further as required.