Despite the recent sharp turns in global trade policy, the world's stock exchanges – in particular Wall Street – seem to be relatively strong.
In the USA, Nasdaq and S&P 500 reached near record levels this week. The stock exchanges have recovered strongly since they plummeted after the American president Donald Trump's first announcement about trade tariffs in early April.
Taco trade
Some experts have explained this paradox with the concept of "taco trade", which refers to the fact that the market has now gotten used to Trump making tariff plays that he takes back if the market reacts negatively.
Elisabet Kopelman, US economist at SEB, believes that it is the hope that Trump's latest tariff threats will not be realized that is keeping the stock exchanges afloat. Either because the president brakes himself – or because other circumstances do so.
No one knows where the tariffs will end up since Trump wavered last time after announcing tariffs, says Elisabet Kopelman.
Additionally, a court process that starts on July 31 in the USA will decide whether it is even legal to use the legislation that Trump has made to introduce the import tariffs.
This may be another reason for other countries not to give in to the USA so easily, says Elisabet Kopelman.
The market has, however, landed on the fact that it can live with the tariffs if they end up at 10–15 percent, she believes.
If the high 30 percent tariffs that the USA has threatened with are actually implemented, the market may, on the other hand, get a cold shower.
Then you approach the levels you had in early April. The fear we saw then does not characterize the market right now. But if the negotiations between the EU and the USA do not succeed, we may end up in that situation again, she says.
