There’s No End in Sight for Tariff Worries. What That Means for Stocks.

Shipping containers are stacked at the Port of Los Angeles in May. (Justin Sullivan/Getty Images)

Trade tensions are likely to recapture markets’ attention this week and through the summer months as President Donald Trump looks to ride his recent wins on taxes and immigration into tariff negotiations.

While the uncertainty over whether Republicans’ tax-and-spending bill would pass has been resolved, the situation on trade is different. Reshaping the international trade system is a vastly complex enterprise, so the uncertainty tied to trade talks —no one knows whether deals will deals begin to emerge over the coming weeks—likely will be a feature for markets into the back half of the year and possibly beyond.

The details are continually shifting. Trump has said that later Monday, he will begin sending letters outlining trade terms to scores of nations that have failed to reach agreements since the April 8 pause on the so-called reciprocal tariffs he unveiled on April 2. That tariff suspension was intended to end on Wednesday.

Treasury Secretary Scott Bessent, meanwhile, told CNN’s State of the Union that the U.S. would focus its dealmaking efforts to 18 countries that comprise around 95% of overall trade, and hinted at a new deadline of Aug. 1. Tariffs on countries that haven’t reached deals by then will “boomerang” back to their April 2 levels, he said.

Tariff revenue remains a key plank in the president’s economic strategy, but became even more important for the nation’s fiscal health following last week’s passage of the One Big Beautiful Bill Act, which will add around $3.4 trillion to the U.S. debt levels over the next 10 years.

Comprehensive deals have been difficult to come by. While the U.S. and the United Kingdom reached a framework agreement last month, important details were left dangling. A broad trade pact was reached last week with Vietnam, but the terms haven’t been published.

There is also a truce of sorts on trade with China, reached in late June. It appears to allow for the export of rare-earth minerals to the U.S. but doesn’t tackle the 55% effective tariff rate on goods arriving from the world’s second-largest economy.

Officials have set a tentative deadline of Aug. 12 for the removal of those tariffs, and the setting of a baseline levy for trade between Washington and Beijing.

Further complicating the picture is that the legal basis for many of the president’s reciprocal tariffs, however, as well as a levy placed on goods arriving from Canada and Mexico tied to disrupting fentanyl traffic, remains in limbo.

A federal court will hear arguments for and against a May ruling by the Court of International Trade, which deemed both tariffs unlawful, on July 31. A final ruling, and a likely appeal to the U.S. Supreme Court, will linger into the autumn.

Irrespective of that decision, the president will retain his power to impose tariffs on the basis of national-security concerns. That keeps alive the prospect of levies on steel and aluminum, as well as the automotive and tech sectors, for years to come.

“Tracking threatened tariffs, actual tariffs, potential retaliation, temporary suspensions, sectoral investigations and partial court rulings has been an exhausting challenge since Trump was re-elected,” said Christopher Smart, managing partner at Arbroath Group, a geopolitical strategy firm.

“That uncertainty has been a big part of the problem, as companies freeze any decisions about where to build their next factory or how to design their global supply chains.”

So far, the complicated matrix of tariffs, deadlines, trade agreement details, and sector exemptions hasn’t cast too long a shadow over U.S. stocks since the April 8 decision to suspend the levies until Wednesday, July 9.

The S&P 500 is now up more than 26% since that date, and closed at a record high on Thursday.

However, while a blowout series of first-quarter earnings from megacap tech companies helped power stocks through tariff uncertainty over the spring, a similar rally might be difficult to repeat over the summer.

LSEG data suggests collective earnings for the S&P 500 are likely to rise just 5.8% from last year during the second quarter, less than half the pace recorded over the first three months of the year.

The effect on the deficit of the tax-and-spending bill is also nudging Treasury bond yields higher, with benchmark 10-year notes last marked at 4.36%.

The weakest U.S. dollar performance in five decades is also likely to add to the cost of imports, which would narrow profit margins.

Uncertainty about tariffs also makes cuts to interest rates by the Federal Reserve less likely, as policymakers watch and wait to see the potential effects of the levies on inflation in the world’s biggest economy.

Thomas Mathews, head of markets for Asia Pacific at Capital Economics, however, remains bullish on U.S. stocks.

“Our base case remains that the uncertainty around tariffs won t be enough on its own to bring the U.S. economy to a crashing halt,” he said. “If so, it s unlikely to be enough to dampen investors
enthusiasm for U.S. equities.”

Write to Martin Baccardax at martin.baccardax@barrons.com